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WILLIAMS  &  ROGERS  SERIES 


COMMERCIAL  LAW 


BY 
D.   CURTIS   GANO,  LL.M. 

OF  THE   ROCHESTER,    N.Y.,   BAR 

ASSISTED  BY 

SAMUEL   C.   WILLIAMS 

TEACHER   OF  COMMERCIAL   LAW   IN   THE   ROCHESTER 
BUSINESS   INSTITUTE 


NEW  YORK-:.  CINCINNATI-:.  CHICAGO 

AMERICAN    BOOK    COMPANY 


T 


Copyright,  1904,  by 
L.   L.   WILLIAMS   AND    F.    E.    ROGERS. 

Entered  at  Stationers'  Hall,  London. 

commercial  law. 
w.  p.    8 


PREFACE 

The  author  of  this  work  has  aimed  to  select  from  the  exten- 
sive field  of  the  law  those  fundamental"  principles,  a  knowledge 
of  which  the  business  man  will  most  frequently  find  of  value  to 
him,  and  which  the  teacher  of  Commercial  Law  will  regard 
most  useful  to  his  classes. 

It  is  not  the  purpose  of  this  volume  to  make  lawyers  of  its 
readers,  but  to  teach  them  to  discern  the  ways  that  lead  from 
litigation,  and  to  enable  them  to  conduct  their  business  deahngs 
with  an  intelligent  idea  of  their  legal  rights  and  limitations. 

Technical  terms  have  been  avoided  as  far  as  possible,  and 
when  it  has  been  thought  advisable  to  use  them  they  have  been 
fully  defined  either  in  the  text  or  in  the  glossary.  The  latter 
contains  a  most  complete  list  of  the  legal  terms  ordinarily  em- 
ployed, with  concise  yet  sufficient  definition. 

The  subjects  discussed  have  been  arranged  in  the  order  in 
which  it  is  deemed  advisable  for  the  teacher  to  present  them. 
It  is  believed  that  all  of  the  subjects  with  which  the  business 
man  should  become  familiar  have  been  included  in  the  present 
volume,  and  are  explained  with  sufficient  detail  to  give  the 
reader  a  correct  knowledge  of  the  law  concerning  them.  In 
many  instances  different  conclusions  that  have  been  arrived  at 
by  the  courts  in  the  several  states  have  been  pointed  out  in 
detail,  that  the  student  may  understand  the  conflicts  in  the  laws 
of  the  different  jurisdictions. 

BeUeving  that  in  the  illustration  of  legal  principles,  actual 
cases  decided  by  the  courts  furnish  material  much  more  valua- 
ble for  the  student  than  purely  hypothetical  cases,  careful 
selection  has  been  made  throughout  the  text  from  the  reports 
of  cases  in  the  different  American  and  English  courts. 

3 

767748 


4  PREFACE 

The  tabulations  at  the  end  of  the  volume  give  in  a  general 
way  the  statutes  of  the  different  states  on  several  important 
topics,  and  may  be  consulted  by  the  student  in  determining  the 
law  in  his  own  state. 

Full  sets  of  forms  have  been  given  in  appropriate  connection 
with  the  text,  and  they  will  be  found  a  valuable  guide  to  the 
student  not  only  while  using  this  work  as  a  text,  but  also  as  a 
reference  when  occasion  may  require  his  use  of  such  forms  in 
business  transactions. 

D.  CURTIS  GANO. 


CONTENTS 

PACB 

Law  in  General ,..7 

Contracts. 

1.  In  General 12 

2.  Parties je 

3.  Infancy l6 

4.  Insanity 21 

5.  Married  Women 23 

6.  Offer  and  Acceptance 24 

7.  Consideration       . 29 

8.  Reality  of  Consent  —  Mistake 3c 

9.  Reality  of  Consent  —  Fraud .38 

10.  Subject-matter 44 

11.  Operation  of  Contract 50 


12.    Statute  of  Frauds 


53 


13.  Sale  of  Goods  Act eg 

14.  Discharge  of  Contract 60 

15.  Damages      .         .         . yj 

16.  Discharge  of  Right  of  Action -74 

Sales  of  Personal  Property. 

1.  In  General 84 

2.  Fixtures 86 

3.  Parties  to  a  Sale '     .         .         .92 

4.  The  Contract  of  Sale 95 

5.  Conditional  Sale 99 

6.  Warranties 104 

7.  Remedies  for  Breach    ....,.,...  108" 
Negotiable  Instruments. 

1.  In  General  .         , 1 16 

2.  Promissory  Notes 123 

3.  Bills  of  Exchange         .         .        „ 128 

4.  Checks 133 

5.  Negotiation 136 

6.  Defenses      ............  149 

7.  Discharge 153 

8.  Interest  and  Usury 154 

Agency. 

1.  In  General  . 159 

2.  Relation  of  Principal  and  Agent 160 

3.  Obligation  of  Principal  to  Agent          .......  165 

4.  Obligation  of  Agent  to  Principal 166 

5.  Obligation  of  Principal  to  Third  Party  .         .     *  .         .         .         .170 

6.  Liability  of  Principal  for  Torts  or  Wrongs  of  Agent    .         .         .         .'  171 

7.  Obligation  of  Third  Party  to  Principal 173 

8.  Obligation  of  Agent  to  Third  Party      .      ^ 173 

9.  Termination  of  the  Relation  of  Principal  and  Agent   .         .         .         .174 
10.  Change  in  Condition  of  the  Parties 176 

Bailment. 

1.  In  General 180 

2.  Bailment  for  the  Bailor's  Sole  Benefit  .         .         .        .         .         .         .183 

5 


6  CONTENTS 

PASS 

3.  Bailment  for  Bailee's  Sole  Benefit 187 

4.  Bailment  for  Mutual  Benefit 190 

5.  Innkeepers 197 

6.  Common  Carriers 200 

7.  Liability  of  Common  Carriers 206 

8.  Carriers  of  Passengers 213 

Partnership. 

1.  In  General 221 

2.  Rights  of  Partners  between  themselves 229 

3.  Liability  of  Partners  to  Third  Parties 234 

4.  Remedies  against  the  Partnership ^         .  236 

5.  Dissolution 237 

6.  Joint  Stock  Companies         .........  242 

Corporations. 

1.  In  General ,.  247 

2.  Powers  and  Liabilities  of  Corporations 252 

3.  Dissolution  of  a  Corporation 254 

4.  Membership  in  a  Corporation 257 

5.  Management  of  Corporations 260 

6.  Rights  of  Creditors  of  Corporations 261 

Insurance. 

1.  In  General  .        .        .  ' 265 

2.  Fire  Insurance , 265 

3.  Fire  Insurance  Policy 270 

4.  Life  Insurance 274 

5.  Marine  Insurance 280 

6.  Casualty  Insurance 283 

Real  Property. 

1.  In  General 2QO 

2.  Fstate  in  Land 292 

3.  Estates  by  Marriage 296 

4.  Sale  and  Conveyance  of  Real  Estate 299 

S-   Deeds 302 

6.  Mortgages ^12 

7.  Landlord  and  Tenant 321 

Courts  and  their  Jurisdiction 332 

Pleading  and  Practice -.2 

Appendix. 

Limitation  of  Actions ^ei 

Interest  Table     ." .... 

Days  of  Grace •'        i        .*.*!!  355 

Statute  of  Frauds  — Married  Women         .        .        \        \        \        \        [357 

Exemption  I^ws         . !         !         !         *  ico 

Chattel  Mortgages _g, 

Gi^sARY ^^j 

Abbreviations g 

^''"° '.'.'.'.','.  387 


COMMERCIAL   LAW 


LAW  IN  GENERAL 

Definition,  —  Law  in  its  broadest  sense  is  a  rule  of  action. 
Every  plant  grows  and  every  animal  lives,  develops,  and  dies 
according  to  a  law;  the  movements  of  the  heavenly  bodies  as  well 
as  the  changes  of  the  seasons  are  also  under  a  like  control.  It 
follows,  therefore,  that  law  in  a  general  sense  is  a  very  compre- 
hensive subject  and  includes  all  of  the  sciences. 

In  a  narrower  sense  law  is  the  system  of  principles  and 
rules  which  relate  to  the  actions  of  men  in  their  dealings  and 
relations  with  one  another. 

Law  Classified.  —  Law  may  be  classified  as  moral,  international, 
and  municipal. 

Moral  Law.  —  The  code  of  ethics  which  prescribes  the  right 
and  wrong  in  the  conduct  of  one  toward  another,  is  called  the 
moral  law.  Its  rules  are  enforced  by  the  sentiment  of  the  people 
derived  from  their  belief  in,  and  understanding  of,  right  and 
wrong.  The  study  of  this  subject  belongs  to  the  science  of 
ethics  rather  than  to  law.  It  is  moral  laws  that  tell  us  to  deal 
honestly,  to  speak  truthfully,  and  not  to  take  advantage  of  the 
weak. 

International  Law.  —  The  law  which  regulates  the  intercourse 
of  nations  is  international  law.  It  consists  of  rules  and  princi- 
ples founded  on  customs,  treaties,  the  weight  of  opinion  as  to 
justice,  and  the  mutual  obligations  which  civilized  nations  recog- 
nize as  binding  upon  them  in  their  dealings  with  other  nations, 
each  being  supreme  and  independent.  The  conduct  of  the 
vessels  of  different  nations  toward  one  another  on  the  high 
seas,  which  are  open  to  all,  is  a  question  of  international  law,  as 

7 


8  LAW  IN  GENERAL 

are  the  rights  and  protection  of  representatives  of  one  country 
within  the  boundary  of  another. 

Municipal  Law.  —  The  rules  of  action  prescribed  by  the 
supreme  power  in  a  state,  commanding  what  is  to  be  done  and 
prohibiting  what  is  not  to  be  done,  constitute  municipal  law. 

Every  state  or  nation  must  have  some  head  or  supreme  power, 
and  in  a  republic  like  ours  this  power  rests  in  the  people  and  is 
administered  by  the  officers  whom  they  elect.  The  laws  are 
made  by  the  legislators,  administered  by  the  executive  depart- 
ment of  the  government,  and  interpreted  by  the  courts  who 
apply  these  laws  to  the  cases  that  are  brought  before  them. 

It  is  necessary  in  civiUzed  nations  that  the  conduct  of  man  in 
relation  with  his  brother  man  be  regulated  and  restricted. 
Otherwise  a  resort  to  arms  would  be  the  only  redress  for  a 
wrong.  So  it  is  that  municipal  law  is  required  in  order  to 
insure  justice  and  harmony.  Because  of  this  branch  of  the  law 
contracts  can  be  enforced,  possession  of  real  property  acquired 
by  its  true  owner,  and  crimes  punished. 

Municipal  Law  Classified.  —  Again,  municipal  law  can  be 
classified  as  constitutional  law,  ecclesiastical  law,  common  law, 
and  equity. 

Constitutional  Law.  —  Every  nation  or  state  has  a  constitu- 
tion, either  written  or  unwritten,  under  which  the  nation  exists 
and  which  as  the  basis  of  its  power  regulates,  distributes,  and 
limits  its  different  functions  and  departments.  The  law  apply- 
ing to  these  constitutions  and  to  the  establishment,  powers,  and 
limitations  of  the  government  as  applicable  thereto  is  known  as 
constitutional  law.  The  United  States  Constitution  provides 
that  no  person  shall  be  deprived  of  life,  liberty,  or  property 
without  due  process  of  law.  The  law  applicable  to  such  a  case 
is  constitutional  law. 

Ecclesiastical  Law.  —  This  is  the  law  administered  in  the 
English  ecclesiastical  courts  and  is  a  system  restricted  mainly 
to  the  affairs  of  the  church  and  matters  pertaining  thereto. 
This  court  is  not  known  in  America.  In  England,  among  other 
things,  the  ecclesiastical  law  had  control  of  questions  affecting 
the  marriage  relation. 


LAW  IN  GENERAL  9 

Common  Law  and  Equity.  —  The  great  body  of  municipal  law 
in  early  English  practice  was  known  as  the  common  law  and 
consisted  originally  only  of  customs.  These,  however,  because 
of  long  usage  came  in  time  to  have  the  force  of  laws.  As  the 
affairs  of  a  growing  commercial  country  became  more  intricate, 
the  hard  and  fast  rules  of  common  law  which  were  firmly  bound 
down  by  precedent  were  found  inadequate  for  all  the  needs  of  the 
people,  and  there  sprang  up  the  chancery  courts  which  decided 
controversies  from  an  equitable  standpoint  and  gave  relief  inde- 
pendent of  precedent.  This  chancery  or  equity  court  still  exists 
in  a  modified  form,  but  the  distinction  between  common  law  and 
equity  has  in  a  great  measure  disappeared.  The  distinction  of 
to-day  consists  in  the  relief  sought ;  if  it  be  merely  money  dam- 
ages, then  it  is  a  common  law  case ;  if  some  extraordinary  relief, 
as  prohibiting  a  man  from  erecting  a  powder  factory  on  his  land 
which  would  endanger  his  neighbor's  dwelling,  or  correcting  a 
deed  of  land  which  was  improperly  drawn,  then  the  case  is  in 
equity. 

Division  of  Common  Law.  —  Common  law  can  be  divided  into 
criminal  and  civil  law. 

Criminal  Law.  —  The  preservation  of  society  demands  that 
certain  rules  be  laid  down  regulating  the  acts  of  its  members 
toward  the  community  in  general.  A  violation  of  these  laws  is 
an  offense  against  the  state  and  is  called  a  crime.  The  law 
which  treats  of  crimes  and  their  punishment  is  called  criminal 
law.  It  forbids  one  man  to  steal  from  another,  making  it  a 
crime,  because  such  acts  endanger  the  security  of  property  and 
the  safety  of  society,  and  a  punishment  of  imprisonment  for 
such  an  offense  is  therefore  provided. 

Civil  Law. — As  distinguished  from  the  criminal  law,  that 
branch  of  law  which  looks  to  the  establishment  and  recovery 
of  private  rights  is  called  civil  law.  It  controls  the  private 
rights  and  remedies  of  men  in  their  relations  with  each  other, 
in  contrast  with  those  that  are  public  and  affect  the. community 
in  general.  As  an  illustration,  if  one  man  sells  goods  to  another 
who  does  not  pay  for  them,  the  seller  can  sue  for  the.  price  and 
the  case  is  a  civil  action. 


10  LAW  IN  GENERAL 

Commercial  Law.  — The  subject  which  we  are  about  to 
pursue,  commercial  law,  is  a  branch  of  the  civil  law,  and  includes 
the  laws  regulating  the  rights  and  relations  of  persons  engaged 
in  trade  or  commercial  pursuits,  as  the  law  of  contracts,  of  part- 
nership, or  of  agency. 

Sources  of  Laws.  —  Our  laws  may  be  considered  as  derived 
from  three  sources,  the  common  law,  the  statutes,  and  the  Con- 
stitution. The  common  law,  which  was  derived  primarily  from 
the  English  law,  was  established  in  this  country  by  the  early 
English  settlers.  It  is  made  up  of  the  rules  and  customs 
which  were  in  use  from  time  immemorial  and  came  to  be  recog- 
nized as  laws.  It  is  also  termed  the  unwritten  law,  because  in 
the  early  times  it  consisted  merely  of  the  customs  of  the  people. 
Now  it  is  embodied  in  the  decisions  of  our  courts,  the  great 
mass  of  our  reports  of  these  decisions  being  the  common  law  in 
this  way  reduced  to  writing. 

The  United  States  and  also  each  of  the  several  states  have 
their  law-making  bodies.  In  the  United  States  it  is  Congress, 
and  in  the  states,  the  legislatures.  These  bodies  from  time  to 
time  pass  certain  laws,  which  are  known  as  the  statute  laws,  also 
called  the  written  laws.  These  statutes  may  expressly  change 
the  common  law,  as  is  often  the  case,  when  the  condition  of  the 
nation  or  the  progress  of  the  people  requires  it.  For  instance, 
by  the  common  law  a  wife  could  hold  no  property,  as  at  her 
marriage  it  reverted  to  her  husband,  but  by  the  statute  law  in 
all  of  the  states  this  is  changed,  and  now  in  most  of  them  she 
can  hold  property  to  the  same  extent  as  though  unmarried.  In 
other  cases  the  statutes  declare  and  put  in  express  terms  a  part 
of  what  formerly  existed  in  the  common  law ;  as,  under  the  com- 
mon law  persons  meeting  on  the  highway  were  to  turn  to  the 
right,  and  the  same  rule  is  now  laid  down  in  the  statutes. 

The  constitutions  of  the  United  States  and  of  the  several 
states  are  another  form  of  the  written  law. 

In  the  United  States  the  Constitution  is  paramount  in  impor- 
tance, and,  in  so  far  as  it  applies,  all  other  laws  must  give  way. 
It  provides  that  certain  subjects  that  come  within  the  province 
of  the  general  government  shall  be  under  the  exclusive  authority 


LAW  IN  GENERAL  tt 

of  Congress,  and  that  the  constitutions  and  legislatures  of  the 
several  states  can  not  provide  or  make  laws  to  the  contrary.  On 
the  other  hand,  all  subjects  not  expressly  confided  to  Congress 
are  left  to  the  state  authorities,  and  are  under  the  control  of  the 
constitution  and  statutes  of  the  state.  Every  state  statute  must 
be  in  conformity  with  the  constitution  of  the  state,  as  well  as 
with  the  Constitution  and  laws  of  the  United  States.  The 
common  or  unwritten  laws  also  must  be  in  conformity  with  the 
statutes  of  the  state,  as  well  as  with  the  state  constitutions  and 
the  Constitution  and  laws  of  the  United  States. 

QUESTIONS    ON    LAW    IN    GENERAL 

1.  Define  law  in  its  broadest  sense. 

2.  Name  and  define  the  classifications  of  law  in  a  narrower 
sense. 

3.  Name  and  define  the  classifications  of  municipal  law. 

4.  Name  and  define  the  classifications  of  common  law. 

5.  What  are  the  three  sources  of  our  laws  1 

6.  When  the  laws  from  these  different  sources  conflict,  which 
is  paramount  1 


CONTRACTS 

I.     IN   GENERAL 

Definition.  —  A  contract  is  defined  by  Blackstone  to  be  an 
agreement  between  two  or  more  persons,  based  upon  sufficient  • 
consideration,  to  do  or  not  to  do  some  particular  thing. 

Necessary  Conditions.  —  There  are  many  elements  necessary 
to  make  a  legal  and  binding  contract,  but  at  the  basis  there  must 
be  an  offer  and  an  acceptance.  A  mere  statement  of  intention, 
or  an  offer  not  accepted,  does  not  constitute  a  contract.  There 
must  be  parties  legally  capable  of  entering  into  the  contractual 
relations,  or  the  contract  will  not  be  binding.  There  must  also 
be  sufficient  consideration,  and  the  subject-matter  of  the  contract 
must  not  be  contrary  to  law.  In  some  cases,  by  statute,  it  is 
required  that  the  contract  be  in  writing  and  under  seal. 

Executed  and  Executory  Contracts. — Contracts  may  be  con- 
sidered under  the  classification  of  executed  and  executory 
contracts. 

An  executed  contract  is  one  in  which  the  transaction  has  been 
performed  and  the  terms  of  the  agreement  fulfilled.  It  is  a 
contract  which  has  been  carried  out. 

An  executory  contract  is  one  in  which  the  thing  agreed  upon 
has  not  been  done. 

In  some  cases  the  contract  may  be  executed  on  one  side  and 
executory  on  the  other ;  that  is,  one  party  may  have  performed 
his  part  of  the  contract,  while  the  other  party  has  not. 

An  illustration  of  this  class  of  contracts  is  found  in  Andreas  v. 
Holcombe,  22  Minn.  339,^  which  was  an  action  upon  the  follow- 
ing agreement :  —      

*  The  cases  cited  throughout  this  book  arose  in  the  state  or  country  indicated  in 
the  title.  Thus  the  case  o{  Andreas  v.  Holcombe,  22  Minn.  339,  given  above,  arose 
in  the  state  of  Minnesota  and  will  be  found  in  volume  22  of  the  reports  of  the 

42 


IN"  GENERAL  ,- 

"^^40.  St.  Paul,  Minn.,  17  June,  1874. 

"In  consideration  for  causing  a  12-inch  view  of  Park  Place  Hotel  to  be 
printed  in  his  atlas  of  the  state  of  Minnesota,  I  promise  to  pay  A.  T.  Andreas, 
or  his  order,  the  sum  of  one  hundred  forty  dollars  ;  payments  to  be  made,  one 
half  on  completion  of  design,  draft,  or  sketch  ;  remainder  when  atlas  is  com- 
plete.    One  hundred  extra  views  given  on  delivery  of  atlas. 

"E.   V.   HOLCOMBE." 

Andreas  had  got  out  the  book,  including  the  view  as  above  specified.  The 
defense  claimed  that  the  agreement  was  not  binding  upon  both  parties.  It 
was  held  that  while  the  writing  did  not  show  any  consideration  on  the  part  of 
Andreas,  it  was  in  the  nature  of  a  request  to  do  the  things  specified,  and 
became  a  binding  and  valid  contract  when  performed  on  the  one  side,  as  the 
performance  was  but  complying  with  the  request. 

Miller  v.  McKenzie,  95  N.Y.  575,  was  an  action  upon  a  promissory  note 
given  by  McKenzie.  The  consideration  was  for  board  and  care  during  illness 
and  for  future  services  to  be  rendered  by  plaintiff  when  required.  Such  services 
were  rendered  by  plaintiff  until  McKenzie  died.  It  was  held  that  a  promissory 
note  given  in  consideration  of  future  services  to  be  rendered,  becomes  valid 
upon  the  performance  of  such  services  in  reliance  thereon,  even  though  there 
was  no  agreement  on  the  part  of  the  payee  at  the  time  of  receiving  the  note  to 
render  them. 

Formal  and  Simple  Contracts. — Contracts  are  again  classi- 
fied as  formal  and  simple. 


Supreme  Court  of  that  state  at  page  339.  Andreas  was  the  plaintiff  in  this  case  and 
Holcombe  the  defendant. 

In  most  of  the  states  the  plaintiff's  name  is  given  first,  followed  by  the  abbrevia- 
tion "  v.,"  standing  for  the  Latin  word  versus,  meaning  against,  and  this  is  followed 
by  the  name  of  the  defendant.  The  title  of  the  above  case  should  be  read,  Andreas 
against  Holcombe,  22  Minnesota  339. 

In  some  states  the  title  of  the  case  is  changed  when  it  is  appealed  to  a  higher 
court,  and  the  name  of  the  person  appealing  from  the  decision  of  the  lower  court 
is  placed  first,  so  if  the  appeal  should  be  taken  by  the  defendant,  the  title  would  be 
exactly  reversed.  If  that  were  the  rule  in  Minnesota  and  the  defendant  had  been 
taking  the  appeal,  the  title  in  the  above  case  would  have  been  Holcombe  v.  Andreas, 
but  this  is  not  the  practice  in  a  majority  of  the  states. 

Some  of  the  reports  of  the  courts  are  not  known  by  the  name  of  the  state,  but  by 
the  name  of  the  reporter  who  compiled  and  edited  the  decision.  In  such  cases  the 
name  of  the  state  has  been  inserted  in  parenthesis.  On  page  22  the  case  of  Arnold 
v.  Richmond  Iron  Works,  I  Gray  (Mass.)  434,  arose  in  the  state  of  Massachusetts 
and  is  reported  in  volume  one  of  Gray's  reports,  Gray  being  the  name  of  the  reporter, 
and  when  he  was  succeeded  by  another,  the  reports  then  took  the  name  of  the  new 
reporter.  The  practice  of  naming  the  reports  after  the  reporter  is  now  almost  uni- 
formly abandoned. 


14  CONTRACTS 

Formal  contracts  are  also  known  as  contracts  under  seal,  and 
are  required  to  be  executed  in  a  certain  way  ;  that  is,  with  a  seal 
attached.  Contracts  executed  in  this  way  do  not  require  any 
consideration.     The  seal  is  said  to  import  a  consideration. 

In  Van  Valkenburgh  v.  Smith,  60  Me.  97,  the  defendant,  to  obtain  the 
discharge  of  a  suit  pending  against  a  railvvaycompany  and  in  favor  of  plaintiff, 
gave  a  bond  to  plaintiff  conditioned  upon  allowing  a  given  time  within  which 
defendant  would  give  certain  notes  indorsed  to  plaintiff  as  specified.  This  w^as 
not  done,  and  the  defense  set  up  was  that  there  was  no  consideration  for  the 
agreement.  The  court  held  that  the  bond  being  under  seal,  the  law  implies  a 
consideration  from  the  solemnity  of  its  execution. 

Rutherford  v.  Baptist  Convention,  9  Ga.  54,  was  an  action  on  a  written 
instrument  given  to  the  Baptist  Convention,  and  recited  the  consideration  to 
be  "■  the  importance  of  literary  and  religious  institutions  to  the  wellbeing  of 
society."  The  instrument  was  sealed.  The  defense  was,  no  consideration. 
The  court  said, "  The  seal  imports  a  consideration,  and  no  other  consideration 
is  necessary  to  give  it  validity." 

Under  the  English  law  the  form  of  the  seal  was  definitely 
prescribed.  One  old  writer  says,  "  It  must  not  be  on  wood, 
leather,  cloth,  or  the  like,  but  only  upon  parchment  or  paper,  for 
the  writing  upon  them  can  be  least  vitiated,  altered,  or  corrupted." 

In  this  early  time  the  seal  was  an  impression  on  wax,  but 
statutes  have  relaxed  the  rigor  of  the  rule,  and  now  the  im- 
pression may  be  on  a  wafer  or  on  the  document  itself,  and  in 
some  states  a  scroll  or  mark  made  with  the  pen,  or  the  word 
"  seal,"  printed  or  written,  if  employed  as  a  seal,  is  sufficient. 

In  Norvell  v.  Walker,  9  W.  Va.  447,  the  parties  entered  into  a  written 
agreement  which  concluded  with  the  words,  "  Witness  the  following  signatures 
and  seals."  Then  followed  W's  signature  followed  by  the  scroll,  and  directly 
under  it  N's  signature.  It  was  held  that  the  one  scroll  was  adopted  as  the 
seal  of  both  parties  and  was  sufficient. 

Farmers  and  Afaniifacturers  Bank  v.  Haight,  3  Hill  (N.Y.)  493,  is  a  case 
decided  in  New  York  in  1842.  It  was  held  that  the  seal  of  a  private  individual 
or  of  a  religious  corporation  impressed  directly  upon  paper  without  the  use  of 
wax  or  other  tenacious  substance  is  a  nullity.  [But  this  does  not  express  the 
taw  in  New  York  State  at  the  present  time.] 

The  principal  requisite  to  the  validity  of  the  seal  is  that  it 
must  be  the  intent  of  the  parties  to  use  the  scroll  or  mark  as 


PARTIES  15 

such,  and  this  is  usually  expressed  by  the  words,  "  In  witness 
whereof  we  have  hereunto  set  our  hands  and  seals  the  day  and 
year  first  above  written,"  or  some  form  analogous  thereto. 

A  seal  is  not  now  given  the  prominence  it  formerly  had,  and 
in  some  jurisdictions  it  is  regarded  as  merely  presumption  of 
consideration.  The  contracts  usually  required  to  be  sealed  are 
deeds,  bonds  and  mortgages,  and  other  instruments  of  an  im- 
portant nature. 

A  simple  contract,  known  also  as  a  parol  contract,  is  one  that 
depends  for  its  validity  upon  the  presence  of  consideration.  It 
may  be  a  contract  required  by  law  to  be  in  some  particular  form 
other  than  under  seal;  as  a  contract  that  by  the  Statute  of 
Frauds  must  be  in  writing.  It  may  also  be  a  contract  of  which 
no  particular  form  is  required  by  law ;  as  one  that  is  valid  whether 
written  or  oral,  for  instance  a  contract  of  employment. 

Oral  and  Written  Contracts.  —  As  just  indicated,  contracts  may 
be  either  oral  or  written.  All  contracts  under  seal  must  be  in 
writing,  and  some  simple  contracts  as  well,  but  the  majority  of 
the  contracts  in  business  relations  are  oral.  You  hire  a  man  to 
do  a  day's  work  for  you.     He  agrees.     This  is  an  oral  contract. 

Express  and  Implied  Contracts.  —  There  are  also  express  and 
implied  contracts,  the  former  being  those  in  which  the  agree- 
ment on  each  side  is  expressly  stated. 

Blacksfone,  Vol.  II.,  p.  443,  says  :  "  When  the  terms  of  the  agreement  are 
openly  uttered  and  avowed  at  the  time  of  the  making,  as  to  deHver  an  ox,  or 
ten  loads  of  timber,  or  to  pay  a  stated  price  for  certain  goods,  it  is  an  express 
contract.  Implied  are  such  as  reason  and  justice  dictate  and  which  therefore 
the  law  presumes  that  every  man  undertakes  to  perform ;  as,  if  I  employ  a 
person  to  do  any  business  for  me  or  perform  any  work,  the  law  implies  that  I 
undertake,  or  contract,  to  pay  him  as  much  as  his  labor  deserves." 

2.   PARTIES 

Two  or  more  Persons  Necessary.  —  We  have  learned  that  a 
contract  is  an  agreement  between  two  or  more  persons.  The 
question  at  once  arises  as  to  what  persons  can  be  parties  to  a 
contract. 


l6  CONTRACTS 

Our  definition  says  that  there  must  be  two  or  more  persons. 
A  man  can  not  contract  with  himself ;  that  is,  a  man,  as  trustee 
or  agent,  can  not  in  such  capacity  deal  with  himself  in  his  indi- 
vidual capacity. 

In  Bain  v.  Brown,  56  N.Y.  285,  Brown  was  the  agent  for  Bain  and  was 
authorized  to  sell  certain  real  estate  for  $17,000.  He  contracted  to  sell  at 
this  figure  and  so  advised  Bain.  Next  day  he  negotiated  to  sell  the  property 
to  other  parties  for  $26,000  and  signed  a  contract  in  his  own  name.  He  then 
secured  an  assignment  of  the  first  contract  and  had  Bain  deed  direct  to  the 
second  purchasers.  An  action  was  brought  to  recover  the  difference  between 
$17,000  and  $26,000,  and  it  was  held  that,  assuming  the  first  sale  to  be  made 
in  good  faith,  the  agent  could  not  appropriate  the  advances,  but  the  principal 
was  entitled  to  the  benefit. 

In  White  v.  Ward,  26  Ark.  445,  it  was  held  that  the  purchase  by  a  trustee, 
or  agent,  of  the  property  of  which  he  has  the  sale,  carries  fraud  on  the  face  of  it. 
It  is  an  abuse  of  confidence  and  any  title  or  benefit  derived  therefrom  inures  to 
the  benefit  of  the  principal. 

There  are  disqualifying  circumstances  or  conditions,  necessary 
for  us  to  consider,  which  render  a  person  incompetent  to  enter 
into  a  contract  with  another. 


3.   INFANCY 

Infancy  Defined.  — By  the  common  law,  all  persons  under  the 
age  of  twenty-one  years  are  infants,  and  this  is  the  law  in  all 
of  the  states,  excepting  a  few  in  which  by  statute  females  are 
declared  of  age  at  eighteen. 

There  is  a  period  in  the  life  of  every  person  during  which, 
because  of  his  tender  years,  he  is  incapable  of  doing  business 
for  himself,  when  he  is  not  of  sufficient  maturity  to  bind  himself 
by  agreement.  But  as  the  child  increases  in  age,  his  mental 
capacity  grows  and  strengthens,  and  he  arrives  at  a  time  when 
he  is  fully  qualified  to  care  for  himself  and  to  make  agreements 
that  will  bind  him.  The  exact  age  when  this  condition  begins 
differs  with  different  persons,  but  the  law  decides  that  twenty- 
one  is  an  average  age,  and  it  is  then  that  the  person,  in  the  eyes 
of  the  law,  attains  full  mental  capacity. 


INFANCY 


17 


Law  Protects  Infants.  —  Until  this  age  arrives,  the  law  puts 
many  safeguards  around  the  infant,  so  that  he  shall  not  be 
imposed  upon.  In  general  it  may  be  said  that  any  contract 
made  by  an  infant  is,  in  law,  voidable ;  that  is,  the  infant  upon 
becoming  of  age  can  repudiate  it  and  demand  that  any  consid- 
eration he  may  have  paid  be  returned  to  him. 

In  Spencer  v.  Carr,  45  N.Y.  406,  the  parents  of  an  infant  six  years  of  age 
deeded  real  estate  to  her.  Subsequently,  the  parents  deeded  the  same  prop- 
erty in  trust  to  another,  and  the  infant,  at  the  mother's  request,  signed  the 
mother's  name  to  the  deed.  It  was  held  that  the  infant  could  claim  title  under 
the  original  deed  to  her. 

In  Carpenter  v.  Carpenter,  45  Ind.  142,  plaintiff,  an  infant,  had  traded 
horses.  He  tired  of  his  bargain  and,  having  tendered  back  the  horse  he  re- 
ceived, demanded  his  original  horse.  It  was  refused.  The  court  held  that  he 
could  recover  his  horse,  even  though  he  had  not  tendered  back  the  horse  he 
got  in  the  trade,  and  even  if  the  horse  he  got  was  injured  or  dead.  It  is  not 
necessary  for  the  disaffirmance  that  the  other  party  may  be  put  in  statu  quo 
(see  glossary).  This  case  also  holds  that  the  fact  that  the  infant  falsely  rep- 
resented himself  to  be  of  age  did  not  prevent  his  avoiding  the  contract. 

In  Bozeman  v.  Browning,  31  Ark.  364,  it  was  held  that  an  infant  who  sells 
real  estate  and  places  his  vendee  in  possession  must,  if  he  desires  to  avoid  the 
conveyance,  disaffirm  without  undue  delay. 

The  Contract  of  an  Infant  is  Voidable  and  not  Void.  —  No  one 

but  himself,  his  legal  representative  after  his  death,  or  those 
entitled  to  his  estate,  if  the  contract  is  avoided,  can  disaffirm 
it.  The  contract  is  said  to  be  held  in  abeyance  during  the 
infancy,  and  upon  the  infant's  becoming  of  age  he  may  either 
affirm  or  disaffirm  the  contract.  When  a  contract  with  an  infant 
is  made  by  a  person  of  full  age,  the  infant  alone  has  the  right 
to  disaffirm ;  the  other  party  can  not  repudiate  it.  The  privilege 
is  also  personal  to  the  infant ;  neither  his  guardian  during  his 
minority  nor  his  creditors  after  he  has  become  of  age  can  dis- 
affirm his  contracts. 

In  Kendall  v.  Lawrence,  22  Pick.  (Mass.)  540,  an  infant  deeded  certain 
land  to  another  and  after  becoming  of  age  neither  avoided  nor  confirmed  the 
deed.  After  he  became  of  age  creditors  of  the  infant  tried  to  set  aside  the 
sale  or  take  the  land  on  attachment.  It  was  held  that  the  deed  was  valid  as 
to  third  parties.  The  deed  of  a  minor  is  voidable  and  the  right  to  avoid  it  is 
a  personal  privilege  to  the  minor  and  his  heirs. 

COM.  LAW  —  2 


iS  CONTRACTS 

Affirmance  of  Executed  Contracts.  —  The  question  at  once 
arises,  must  the  infant,  upon  becoming  of  age,  disaffirm  to 
avoid  the  contract,  or  will  it  be  considered  to  be  avoided  unless 
he  actually  affirms  it  ?  The  answer  depends  entirely  upon  the 
nature  of  the  contract.  The  rule  varies  in  its  application  to 
executed  and  executory  contracts.  In  the  case  of  an  executed 
contract  the  benefit  which  the  infant  seeks  to  bestow  has  been 
given  to  the  other  party  and  is  good  until  it  is  disaffirmed,  and 
the  disaffirmance  must  be  by  express  words  or  by  some  distinct 
and  positive  act  which  leaves  no  doubt  of  the  intent. 

In  Towle  v.  Dresser,  73  Me.  252,  plaintiff,  an  infant,  sold  a  horse  to  defendant 
and  took  two  notes  in  payment.  Later  he  tendered  back  the  notes,  rescinded 
the  contract,  and  sued  for  possession  of  the  horse.  It  was  held  that  he  could 
recover  the  horse.  This,  it  will  be  seen,  is  a  case  in  which  express  disaffirm- 
ance is  necessary.  This  case  also  holds  that  the  disaffirmance  can  be  made 
during  the  infancy,  and  this  suit  was  brought  by  plaintiff,  through  his  father, 
while  he  was  yet  an  intaut. 

Silence  for  a  reasonable  time  after  majority  will  be  construed, 
in  many  cases  of  this  kind,  as  an  affirmance,  if  it  is  coupled  with 
a  retention  of  the  benefits. 

Affirmance  of  Executory  Contracts.  —  On  the  other  hand,  if 
the  contract  is  executory,  it  is  necessary  for  the  infant  to  affirm, 
upon  becoming  of  age,  or  the  contract  is  avoided.  In  such  an 
agreement  infancy  is  a  defense  if  sued  upon,  unless  it  can  be 
shown  that  the  contract  was  affirmed  after  maturity. 

Eureka  Co.  v.  Edwards,  71  Ala.  248,  was  an  action  to  cancel  a  deed  exe- 
cuted by  minors.  It  was  held  that  if  an  infant  execute  a  deed  to  lands,  a 
binding  ratification  of  the  contract  after  he  becomes  of  age  requires  that  there 
be  some  positive  act  on  his  part  either  affirming  the  conveyance  or  making  it 
inconsistent  with  the  right  to  repudiate  it. 

An  infant  can  generally  disaffirm  his  contracts  before  as  well 
as  after  becoming  of  age. 

In  Childs  v.  Dobbins,  55  Iowa  205,  plaintiff,  a  minor,  entered  into  a  contract 
with  defendant  for  the  purchase  of  some  trees  and  shrubbery  amounting  to 
$500,  which  he  paid.  About  five  days  thereafter  and  while  still  a  minor  he 
tendered  back  the  stock  and  demanded  the  consideration  paid.  It  was  held 
that  an  infant  can  disaffirm  a  contract  at  any  time  during  minority  or  within  a 
reasonable  time  thereafter. 


INFANCY  19 

The  rule  is  well  established  that  the  infant  can  not  avoid  a 
part  and  affirm  the  rest.  He  can  not  affirm  as  to  part  and  dis- 
affirm as  to  the  balance. 

Heath  v.  West,  28  N.H.  loi,  was  a  case  in  which  plaintiff  purchased  a 
horse,  paying  $75  in  cash  and  giving  his  note  secured  by  a  mortgage  on 
the  horse  for  the  balance.  Plaintiff  refused  to  pay  the  mortgage,  and  when 
the  horse  was  sold  to  satisfy  the  same,  brought  an  action  to  recover  it.  Held, 
that  he  could  not  repudiate  the  mortgage  and  hold  the  horse.  It  was  all  one 
transaction  and  he  could  not  avoid  a  part  and  affirm  the  rest.  He  must  take 
the  benefits  with  the  detriments. 

In  rescinding  an  executed  contract  the  infant  must  restore 
what  he  has  received  if  he  has  the  property  and  he  is  liable  to 
an  action  at  law  for  its  recovery ;  still  the  right  of  an  infant  to 
disaffirm  is  superior  to  this  right,  and  although  the  considera- 
tion the  infant  has  received  may  have  disappeared,  yet  the  infant 
may  disaffirm,  even  if  he  does  not  return  the  thing  received  or 
its  equivalent. 

In  Green  v.  Green,  69  N.Y.  553,  defendant  being  a  minor  sold  certain  land 
to  his  father  for  $400.  After  arriving  at  his  majority  he  reentered  upon  said 
land  and  disaffirmed  his  contract.  An  action  for  trespass  was  brought  by  the 
father.  The  son  did  not  offer  to  restore  the  $400  and  it  was  shown  that  he 
had  used  up,  lost,  or  squandered  the  money,  and  had  no  part  of  it  when  he 
became  of  age.  Held  that  he  had  the  right  to  disaffirm  the  deed  without 
restoring  the  consideration.  The  right  to  rescind  is  a  protection  for  the 
infant  and  is  riot  contingent  upon  an  impossibility,  and  it  might  be  impossible 
for  him  to  restore  the  consideration  if  he  did  not  have  it. 

There  is  a  particular  class  of  infant's  contracts  that  are  always 
void  and  therefore  of  no  effect.  This  class  is  the  infant's  power 
of  attorney  under  seal,  which  is  in  no  case  vaUd. 

Waples  V.  Haslings,  3  Harrington  (Del.)  403,  is  a  case  in  which  an  infent 
in  business  executed  a  bond  and  warrant  of  attorney  to  plaintiff.  This  being 
sued  upon,  it  was  held  that  an  infant's  warrant  of  attorney  is  void  and  not 
voidable,  and  no  action  can  be  maintained  upon  it. 

Many  jurisdictions  extend  the  rule  to  every  appointment  of 
an  agent  in  any  case. 

In  Trueblood  v.  Trueblood,  8  Ind.  195,  a  bond  was  given  by  an  infant  and 
his  father  that  the  infant  would,  upon  becoming  of  age,  convey  a  certain  piece 
of  property,  and  an  action  was  brought  to  compel  the  transfer.     It  was  proved 


20  CONTRACTS 

that  after  becoming  of  age  he  ratified  the  act  of  his  father  in  giving  the  bond 
as  his  agent.  He  later  repudiated  it  and  sold  to  another.  The  court  held 
that  an  infant  could  not  appoint  an  agent.  Such  an  act  is  void  and  a 
ratification  after  becoming  of  age  can  not  make  it  of  any  effect. 

Contracts  for  Necessaries.  —  But  there  exist  a  number  of  cases 
in  which  an  infant  will  be  absolutely  bound  by  his  contracts,  the 
principal  illustration  being  his  contracts  for  necessaries. 

If  the  law  did  not  give  protection  to  parties  furnishing  the 
necessaries  of  life  to  an  infant,  we  can  see  that  many  cases  would 
arise  in  which  the  infant  might  suffer.  Therefore  the  law  says 
that  when  an  infant  is  not  supplied  with  necessaries  by  his 
parents  or  guardian  or  others  to  whom  he  may  look,  he  may 
contract  for  them  himself.  The  law  creates  a  promise  on  the 
part  of  the  infant  to  pay  what  they  are  reasonably  worth,  but 
this  does  not  mean  that  the  tradesman  can  charge  what  he 
pleases,  so  it  will  be  seen  that  the  infant  is  still  protected. 

In  Hyman  v.  Cain,  48  N.C.  iii,  defendant,  who  was  an  orphan  about  nine 
years  of  age,  boarded  with  the  plaintiff  for  about  two  years.  An  action  was 
brought  for  his  board.  The  court  held  that  the  law  will  imply  a  promise 
on  the  part  of  an  infant  to  pay  a  reasonable  price  for  necessaries  furnished 
to  him. 

Morton  v.  Steward,  5  Bradwell  (111.)  533,  was  an  action  on  a  note  given 
by  an  infant,  and  it  was  proved  that  the  consideration  was  necessaries  fur- 
nished the  infant.  But  the  court  held  that  an  infant  is  incapable  of  stating 
an  account  or  binding  himself  by  a  note  to  pay  a  particular  price  or  sum  for 
necessaries,  although  he  is  liable  for  the  reasonable  value  of  the  necessaries 
furnished.  It  is  required  for  the  protection  of  the  infant  that  the  price  charged 
should  be  inquired  into. 

Necessaries  Defined.  —  The  question  is  often  in  dispute  as  to 
what  are  necessaries,  and  the  rule  generally  laid  down  is  that 
they  are  anything  required  by  the  particular  person  for  his 
reasonable  comfort,   subsistence,  and  education,  regard  being 

had  to  his  means,  occupation,  and  standing  in  society. 

« 

Peters  v.  Fleming,  6  M.  &  W.  41,  was  an  action  in  an  English  court  for  a 
bill  of  goods  sold  defendant.  They  consisted  of  four  finger  rings,  a  watch 
chain,  some  pins,  etc.,  amounting  to  over  £^Z.  The  plaintiff  sought  to  hold 
defendant  for  necessaries.  It  appeared  that  the  defendant  was  a  student  at 
the  University  of  Cambridge,  that  his  father  was  a  gentleman  of  fortune  and  a 


INSANITY  21 

member  of  parliament.  The  court  held  that  it  was  a  question  for  the  jury 
whether  the  articles  were  such  as  a  person  in  his  station  in  life  would  reason- 
ably require,  and  that  necessaries  included  articles  useful  and  suitable  to  the 
state  and  condition  of  the  party. 

In  Strongv.  Fooie,  42  Conn.  203,  the  defendant,  a  minor  fifteen  years  of  age 
and  the  owner  of  a  large  fortune,  had  his  teeth  filled  by  the  plaintiff,  a  dentist. 
The  bill  rendered  amounted  to  $93.  It  was  proved  that  the  teeth  were  de- 
cayed and  pained  the  defendant.     Held,  that  the  work  was  for  necessaries. 

In  Werner's  Appeal,  10  Norris  (Pa.)  222,  it  was  held  that  a  bill  of  $45  for 
nursing  an  infant  through  his  last  illness  and  preparing  his  body  for  burial 
was  a  necessary  and  proper  charge  against  his  estate. 

An  infant  is  liable  for  necessaries  supplied  to  his  wife  the 
same  as  if  he  were  an  adult. 

A  tradesman  who  furnishes  an  infant  with  supplies  is  bound 
to  show  that  they  are  necessaries,  and  if  the  infant  already  has  a 
sufficient  supply,  he  can  not  recover. 

Barnes  v.  Toye,  13  Q.  B.D.  (Eng.)  410,  was  an  action  for  the  price  of 
necessaries  furnished  an  infant.  The  defense  was  that  the  infant  was  already 
sufficiently  supplied  with  goods  of  the  same  class  and  was  not  in  want  of  these. 
The  court  held  that  the  defendant  could  show  that  the  goods  were  not  neces- 
saries as  he  was  already  supplied  with  sufficient  goods  of  a  similar  description, 
and  it  was  immaterial  whether  the  plaintiff  did  or  did  not  know  of  the  existing 
supply. 

4.   INSANITY 

General  Rule.  —  Since  a  contract  requires  a  meeting  of  the 
minds  of  the  contracting  parties,  it  is  evident  that  a  person 
lacking  the  mental  capacity  can  not  make  a  valid  contract. 
Some  insane  persons  appear  perfectly  rational  and  others  have 
rational  periods.  It  is  difficult,  therefore,  to  determine  the 
mental  condition  of  the  party,  and  one  may  deal  with  an  insane 
person  and  be  in  ignorance  of  his  insanity. 

The  rule  as  generally  adopted  in  this  country  is  that  if  the 
insanity  of  an  individual  has  not  been  decreed  by  the  courts,  and 
a  party  dealing  with  him  is  ignorant  of  the  insanity,  and  the 
contract  has  been  so  far  executed  that  the  parties  can  not  be  put 
in  their  original  condition,  the  insane  party  is  held. 

Gribben  v.  Maxwell,  34  Kan.  8,  was  an  action  to  set  aside  a  conveyance  of 
real  property  executed  by  one  Olive  Gribben,  a  lunatic.     The  purchaser  did 


22  CONTRACTS 

not  know  of  her  insanity,  and  paid  a  fair  price  for  the  property.  The  court 
held  that  where  the  purchase  of  the  real  estate  was  made  and  the  conveyance 
obtained  in  good  faith  prior  to  an  inquisition  and  finding  of  lunacy,  and  for  a 
fair  and  reasonable  price,  without  knowledge  of  the  insanity,  no  advantage 
being  taken  of  the  insane  person,  the  conveyance  can  not  be  avoided,  if  the 
consideration  has  not  been  returned  to  the  purchaser  and  no  offer  has  been 
made  to  return  it. 

But  if  the  lunatic  has  been  declared  by  the  courts  to  be  insane, 
or  the  party  dealing  with  him  knew  of  his  insanity,  the  contract 
is  void. 

In  Carter  v,  Beckwith,  128  N.Y.  312,  plaintiff,  an  attorney,  upon  the  request 
of  B,  who  had  been  legally  declared  insane,  instituted  proceedings  to  have  him 
adjudged  sane,  and  to  have  the  control  of  his  property  restored  to  him.  In 
this  proceeding  it  was  determined  that  he  was  still  insane,  and  the  application 
was  refused.  After  B's  death,  plaintiff  presented  his  claim  for  services,  it 
was  held  that  he  could  not  recover  on  the  ground  of  a  contract  with  B,  as  any 
contract  entered  into  with  a  person  judicially  declared  insane  is  absolutely  void. 
The  court,  however,  in  its  discretion  allowed  reasonable  costs. 

If  the  lunatic  afterwards  becomes  sane,  he  may  then  ratify  or 
disaffirm  all  of  his  voidable  contracts,  the  same  as  an  infant  upon 
attaining  his  majority. 

In  Arnold  v.  Richmond  Iron  Works,  i  Gray  (Mass.)  434,  an  insane  person 
deeded  away  some  land,  and  after  becoming  of  sound  mind  and  knowing  that 
the  grantees  were  in  possession,  did  not  reenter  or  disaffirm  the  conveyance, 
but  received  payments  on  the  notes  given  for  the  purchase  price.  Held,  that 
from  this  act  his  intention  to  ratify  the  deed  may  be  inferred,  although  he  did 
not  know  at  the  time  that  he  had  the  power  to  avoid  the  deed.  The  deed  was 
not  void,  but  voidable,  and  in  order  to  avoid  such  a  deed  before  affirmance,  the 
consideration  for  it  must  be  restored. 

A  lunatic,  like  an  infant,  is  liable  for  necessaries. 

Sawyer  v.  Lufkm,  56  Me.  308,  was  an  action  for  services  in  caring  for  de- 
fendant, who  was  an  insane  person  and  incapable  of  caring  for  herself.  The 
court  held  that  if  necessaries  are  furnished  an  insane  person  in  good  feith  and 
under  justifiable  circumstances,  the  person  furnishing  them  may  recover  of  the 
insane  person.  The  judge  said,  "If  the  law  were  not  so,  the  insane  might 
perish  if  guardians  having  means  should  neglect  or  refuse  to  furnish  the  sup- 
plies needed.  They  stand  in  the  same  position  as  a  minor,  and  are  liable  for 
necessaries." 

During  a  lucid  interval,  the  lunatic  being  sane,  his  contracts 
are  bmdmg  on  nJni. 


MARRIED   WOMEN-  23 

Drunkenness   may  render  a  Contract  Voidable.  —  If  a  man 

enters  into  a  contract  while  drunk,  he  may  afterwards  affirm  or 
disaffirm  it,  unless  he  has  been  judicially  declared  a  habitual 
drunkard,  in  which  case  his  contracts  are  void. 

In  Carpenter  v.  Rodgers,  6i  Mich.  384,  the  plaintiff  traded  a  good  team  of 
horses,  worth  $150  to  $200,  with  defendant,  a  horse  dealer,  for  a  team  worth 
about  $75.  It  was  shown  that  plaintiff  was  of  feeble  mind  and  scarcely  able 
to  do  business,  and  that  when  the  deal  was  made  he  was  intoxicated  to  such 
a  degree  that  he  did  not  know  what  he  was  doing.  There  was,  however,  no 
rescission  on  the  part  of  plaintiff,  nor  offer  to  return  the  team.  Held,  that 
a  contract  entered  into  by  a  party  so  drunk  as  not  to  know  what  he  is  doing 
is  voidable  only  and  not  void,  and  may  therefore  be  ratified  or  rescinded  when 
he  becomes  sober.     Not  having  been  rescinded  the  contract  was  binding. 

In  Bush  V.  Breimg,  113  Pa.  St.  310,  Breinig  attended  a  public  sale  of  real 
property,  and  having  made  the  highest  bid,  the  property  was  struck  off  to  him. 
Afterwards,  while  so  drunk  as  to  be  deprived  of  reason  and  understanding,  he 
executed  a  written  contract  of  purchase  and  paid  part  of  the  purchase  price. 
Thereafter  he  sought  to  avoid  the  contract  and  brought  action  to  recover  the 
money  paid.  The  court  allowed  hira  to  rescind  the  contract  and  to  recover 
his  money. 

To  affect  his  contract  it  is  necessary  that  his  reason  be  so 
impaired  by  intoxication  for  the  time  being  ae  to  render  him 
incompetent  to  comprehend  the  consequences  of  his  acts. 

In  Johns  v.  Fritchey,  39  Md.  258,  a  party  sought  to  avoid  a  power  of  attor- 
ney given  by  him,  on  the  ground  that  he  was  intoxicated.  The  court  held 
that  to  avoid  the  contract  on  such  grounds  it  was  incumbent  on  him  to  pro- 
duce clear  and  satisfactory  proof  that  he  was  in  such  a  state  of  drunkenness 
at  the  time  as  to  be  unable  to  know  what  he  was  doing,  or  to  judge  of  the 
consequence  of  his  own  acts. 

Cummings  v.  Henry,  10  Ind.  109,  was  an  action  to  recover  on  a  note  given 
for  the  purchase  price  of  a  horse.  It  was  proved  that  defendant  was  intoxi- 
cated at  the  time  and  had  afterwards  offered  to  return  the  horse  and  asked  for 
a  rescission  of  the  contract.  Held,  that  the  party  might  rescind  if  he  was  so 
far  intoxicated  as  to  render  him  incompetent  to  contract. 


5.    MARRIED  WOMEN 

Under  the  common  law,  from  the  earliest  times,  the  husband 
was  the  head  of  the  family.  At  marriage  a  life  interest  in  his 
wife's  real  estate  and  the  absolute  title  to  her  personal  property 


24  CONTRACTS 

vested  in  him.  She  could  not  sue  or  be  sued  without  his  joining 
or  being  joined  as  a  party ;  her  earnings  became  his,  and  in  fact 
the  identity  of  the  married  woman  was  lost  and  she  could  not 
in  her  own  name  make  a  contract. 

This  is  now  so  completely  changed  by  statute  throughout  our 
own  country  and  in  England  that  it  is  scarcely  worth  our  notice 
except  as  an  illustration  of  the  changes  which  our  laws  undergo 
during  the  progress  of  time.  Now  we  find  that  by  statute  the 
married  woman  can  conduct  her  own  separate  business,  can 
contract  independently  of  her  husband,  and  in  fact  in  most  of 
the  states  she  has  the  same  legal  rights  and  powers  as  an 
unmarried  woman. 

6.    OFFER  AND  ACCEPTANCE 

The  Foundation  of  a  Contract.  —  Traced  back  to  its  origin 
a  contract  amounts  to  this :  The  first  party  says,  "  I  will  take  a 
certain  sum  for  this  article  ;  "  to  which  the  second  party  answers, 
"  I  will  accept  your  offer  and  give  you  the  specified  sum." 

You  enter  a  furniture  store.  The  tradesman  by  exhibiting 
his  wares  virtually  says  he  will  take  the  stated  price  for  such 
articles.  You  say  you  will  take  a  certain  chair,  marked  ;^io. 
Here  we  have  an  offer  and  acceptance. 

The  offer  must  be  explicit.  If  A  says,  "  I  may  take  j^ioo  for 
this  horse  when  I  get  ready  to  sell  him,"  this  is  not  an  offer 
which  B  can  accept  and  thereby  create  a  contract. 

The  acceptance  must  be  absolute  and  on  the  exact  terms  con. 
tained  in  the  offer.  If  A  offers  to  sell  a  load  of  hay  for  $io, 
and  B  says  he  will  give  him  ^9  for  it,  no  contract  is  made  be- 
cause there  is  no  acceptance  of  the  offer. 

In  Min7teapolis  6r»  St.  Louis  Railway  v.  Columbus  Rolling  Mill,  119 
U.S.  149,  plaintiff  asked  defendant's  price  on  iron  rails.  On  December  8 
defendant  offered  to  sell  plaintiff  from  2000  to  5000  tons  of  iron  rails  at  a 
certain  price,  and  added,  "If  accepted,  we  shall  expect  to  be  notified  prior  to 
December  20."  On  December  16  plaintiff  wired,  "Please  enter  our  order 
for  1200  tons  as  per  your  favor  of  the  8th."  December  18  defendant  wired, 
"We  can  not  book  your  order  at  that  price."     On  December  19  plaintiff 


OFFER  AND  ACCEPTANCE  25 

wired,  "Enter  our  order  for  2000  tons  as  per  your  letter  of  the  8th."  The 
defendant  refused  to  furnish  the  rails ;  and  in  an  action  brought  for  breach  of 
contract,  the  court  held  that  the  telegram  of  the  i6th  was  not  an  acceptance, 
as  it  was  different  in  terms  from  the  offer,  and  that  this  order  amounted  to  a 
rejection  of  the  offer  and  left  it  no  longer  open,  so  the  telegram  of  the  19th 
was  of  no  effect. 

There  must  be  no  Qualification  in  the  Acceptance.—  If  A  offers 
to  sell  his  automobile  to  B  for  $600,  and  B  accepts  if  A  will  take 
$300  down  and  his  note  for  the  balance  at  30  days,  the  accept- 
ance is  quaUfied  and  does  not  constitute  a  contract. 

In  Baker  v.  Holt,  56  Wis.  100,  defendant  in  Connecticut  wrote  to  plaintiff 
in  Wisconsin,  offering  to  sell  him  certain  land  at  a  stated  price  payable  at  a 
specified  time,  but  said  nothing  about  the  place  of  payment  or  delivery  of  the 
deed.  Plaintiff  replied  that  he  would  take  the  land  upon  the  terms  mentioned, 
and  added,  "  You  may  make  out  the  deed,  leaving  the  name  of  the  grantee 
blank,  and  forward  the  same  to  I.  L.  Mosher  at  Grand  Rapids,  Wis.,  or  to 
your  agent,  if  you  have  one  here,  to  hand  to  me  on  the  payment  of  $200  and 
the  delivery  of  necessary  security."  Held,  that  the  acceptance  was  not  good, 
as  it  was  based  upon  the  conditions  that  the  deed  be  executed  in  blank  and 
that  payment  be  made  in  Wisconsin. 

In  Honey  man  v.  Marry  att,  6  H.  L.  C.  (Eng.)  112,  an  estate  was  adver« 
tised  for  sale  on  certain  terms.  A  authorized  his  solicitor  to  make  an  offer. 
B's  agent  in  reply  wrote,  "Mr.  B  has  authorized  me  to  accept  the  offer  subject 
to  the  terms  of  a  contract  being  arranged  between  his  solicitor  and  yourself. 
Mr.  B  requires  a  deposit  of  from  £,\ioo  to  ^1500  and  the  completion  of  the 
purchase  at  midsummer  day  next."  There  was  no  reply  to  this  letter.  Held, 
that  the  acceptance  was  conditional  and  so  formed  no  complete  contract. 

The  Offer  and  Acceptance  must  pertain  to  the  Same  Object.  — 

A  may  offer  to  sell  his  bay  horse  for  $100.  B  says,  "I  will 
give  you  that  amount  for  your  gray."  There  is  no  contract  be- 
cause the  minds  of  the  parties  have  not  met. 

The  Offer  must  be  communicated  to  the  Party  accepting  it.  — 
If  the  offer  is  not  communicated,  it  can  not  be  said  that  the 
minds  of  the  parties  met.  An  illustration  of  this  is  the  case  of 
a  reward  offered  for  information  concerning  the  parties  to  a 
crime.  A  person  gives  the  information  without  knowledge  of 
the  reward,  but  lays  claim  to  it  when  he  learns  it  has  been 
offered.  In  the  majority  of  such  cases  it  is  held  that  he  can 
not  recover. 


26  CONTRACTS 

Fitch  V.  Snedaker,  38  N.Y.  248,  recites  that  a  woman  was  murdered  in 
Wayne  County.  On  October  14  the  sheriff  of  the  county  offered  a  reward  of 
$200  to  any  person  or  persons  who  would  give  such  information  as  would  lead  to 
the  apprehension  and  conviction  of  the  murderer.  Plaintiff  gave  information 
on  October  11  that  led  to  the  conviction  of  the  guilty  party,  but  he  did  it 
without  reference  to  any  reward.  He  had  not  heard  of  its  being  offered. 
Held,  that  he  could  not  recover.  There  must  be  present  the  elements  of  offer 
and  consent,  and  there  can  be  no  consent  to  that  of  which  the  party  never 
heard. 

When  a  man  works  for  another  without  his  request  or  knowl- 
edge, there  is  no  contract  and  he  can  not  recover. 

In  Bartholonieiv  v.  Jackson^  20  Johns.  (N.Y.)  28,  Jackson  owned  a  field  in 
which  Bartholomew  had  a  stack  of  wheat  and  which  he  had  promised  to  move 
in  time  for  plowing.  Notice  having  been  given,  he  promised  that  it  would  be 
moved  at  10  a.m.  Relying  on  this  promise,  Jackson,  shortly  after  10  a.m., 
set  fire  to  the  stubble  in  a  distant  part  of  the  field,  but  later  found  the  stack 
was  not  removed,  so  did  it  himself  to  save  the  grain,  and  then  sued  Bartholo- 
mew for  the  work.  Held,  the  services  were  rendered  without  request  and  with 
no  promise  express  or  implied  to  pay  for  them,  and  there  can  be  no  recovery. 
The  judge  said,  "  If  a  man  humanely  bestows  his  labor,  and  even  risks  his  life, 
in  voluntarily  aiding  to  preserve  his  neighbor's  house  from  destruction  by  fire, 
the  law  considers  the  services  rendered  as  gratuitous." 

The  Acceptance  must  be  Communicated.  —  Not  only  must  the 
offer  be  communicated,  as  we  have  seen,  but  the  acceptance 
must  also  be  communicated,  and  whether  it  reaches  the  offerer 
or  not,  it  must  be  something  more  than  a  mere  mental  assent. 

Stensgaard  v.  Smith,  43  Minn.  1 1,  was  a  case  in  which  the  plaintiff  received 
from  the  defendant  a  letter  or  statement  setting  forth  that  in  consideration  of 
plaintiff's  agreement  to  act  as  agent  for  the  sale  of  certain  land,  defendant  gave 
to  plaintiff  the  exclusive  right  of  sale  of  same  for  three  months,  and  promised 
to  pay  a  stated  commission  on  said  sales.  Plaintiff,  who  was  a  real  estate 
broker,  took  immediate  steps  to  advertise  and  to  post  notices  for  the  .sale  of  said 
premises,  but  one  month  thereafter  defendant  sold  to  another.  Action  was 
brought  for  damages  for  breach  of  contract.  Held,  that  there  was  no  contract. 
The  instrument  conferred  authority  on  plaintiff  to  sell,  and  if  he  did  sell,  prom- 
ised a  commission.  There  was  no  mutuality  of  obligation.  The  plaintiff  did 
not  bind  himself  to  do  anything.  If  plaintiff,  acting  under  this  authority,  had 
sold  before  revocation,  tlie  sale  would  have  completed  the  contract,  and  the 
commission  would  have  been  earned. 


OFFER  AND  ACCEPTANCE  27 

An  Acceptance  is  binding  as  soon  as  Made.  —  As  we  have  seen, 
the  offer  must  be  communicated  to  the  party  before  it  is  effectual, 
while  an  acceptance  is  binding  as  soon  as  made,  even  though  it 
has  not  come  to  the  knowledge  of  the  offerer.  The  acceptance 
must  be  made  in  the  way  prescribed  or  in  the  way  that  would 
naturally  be  expected.  If  the  offerer  requires  or  suggests  a  mode 
of  acceptance,  he  takes  the  risk  of  the  acceptance  reaching  him. 
A  common  illustration  of  this  is  the  case  of  an  offer  made 
through  the  post  office,  for  in  such  a  case  it  may  be  assumed  that 
the  acceptance  is  to  be  made  in  the  same  way  unless  otherwise 
expressly  stated.  When  made  in  the  required  way,  it  is  held 
that  as  soon  as  the  acceptance  is  sent  the  contract  is  made. 
And  the  completion  of  the  agreement  dates  from  the  time  of 
mailing  the  letter  or  sending  the  telegram,  and  not  from  the 
time  of  receiving  it. 

Taylor  \.  Merchants  Fire  Insurance  Co.,  9  How.  (U.S.)  390,  was  a  case  in 
which,  after  some  correspondence,  the  defendant  insurance  company  wrote 
that  they  would  insure  plaintiff's  house  for  $57.  This  letter  was  received  on 
December  21,  and  on  that  day  plaintiff  accepted  the  offer  and  sent  his  letter 
of  acceptance  with  check  inclosed.  On  December  22,  and  before  plaintiffs 
letter  of  acceptance  and  check  reached  defendant,  the  house  was  burned 
down.  Held,  that  thie  contract  was  complete  when  the  letter  of  acceptance 
was  mailed,  and  therefore  the  company  was  liable. 

In  Trevor  v.  Wood,  36  NY.  307,  plaintiff  living  in  New  York  telegraphed 
defendant  in  New  Orleans,  asking  the  price  of  Mexican  dollars  delivered.  On 
January  31  defendant  answered  by  telegraph,  giving  price  on  50,000,  and  on 
the  same  day  plaintiff  telegraphed  and  accepted  the  offer.  The  telegraph  lines 
became  disabled  and  the  message  was  not  received  until  defendant  had  wired 
that  the  dollars  had  been  sold  to  other  parties.  Held,  that  the  contract  was 
closed  as  soon  as  the  acceptance  was  sent.  As  the  offer  was  by  telegraph,  it 
was  sufficient  to  accept  in  the  same  manner,  and  the  offerer  was  bound  irre- 
spective of  the  time  the  acceptance  was  actually  received- 
Acceptance  must  be  made  as  Prescribed.  —  But  the  preceding 
rule  does  not  hold  good  if  the  offerer  prescribes  a  particular  way 
in  which  the  acceptance  must  be  made.  For  example,  if  the 
offer  is  made  by  mail  and  expressly  requires  that  the  acceptance 
shall  be  telegraphed  back,  it  will  not  be  sufficient  to  send  the 
acceptance  by  mail. 


28  CON-TRACTS 

The  offer  may  be  withdrawn  any  time  before  acceptance, 
but  the  notice  of  withdrawal  dates  from  the  time  it  reaches  the 
party  to  whom  it  is  sent.  The  offer  is  made  irrevocable  only  by 
acceptance. 

In  White  v.  Cor  lies,  46  N.Y.  467,  plaintiff,  who  was  a  builder,  received  a  note 
from  the  defendant  which  said,  "  Upon  an  agreement  to  finish  the  fitting  up 
of  ofiSces  at  57  Broadway  in  two  weelcs  from  date  you  can  commence  at  once." 
No  reply  was  sent,  but  plaintiff  bought  lumber  and  prepared  to  begin  work. 
Next  day  defendant  withdrew  the  offer.  Held,  that  there  was  no  agreement. 
The  mere  buying  of  lumber  was  not  an  act  sufficient  to  notify  defendant  of 
the  acceptance.  A  mere  mental  determination  to  accept  is  not  sufficient ;  the 
manifestation  of  assent  must  be  sufficient  to  give  notice  to  the  defendant. 

In  Boston  Qr»  Maine  Ry.  v.  Bartlett,  3  Cush.  (Mass.)  224,  defendant  made 
a  proposition  in  writing  to  plaintiff  to  accept  a  certain  price  for  some  land,  if 
taken  within  thirty  days.  Plaintiff  accepted  the  proposition  before  the  thirty 
days  expired.  Held,  it  was  a  continuous  offer  that  might  be  withdrawn  at  any 
time  before  acceptance,  but  its  acceptance  within  the  given  time,  and  before 
being  withdrawn,  constituted  a  valid  contract  that  could  be  enforced. 

An  Offer  may  Lapse.  —  The  lapse  of  an  offer  may  be  caused 
by  the  death  of  either  party  before  acceptance. 

Pratt  V.  Trustees,  93  111.  475,  was  an  action  on  a  note  given  by  one  Pratt  to 
the  trustees  of  a  church  as  a  subscription  to  enable  them  to  procure  a  bell. 
Pratt  died  before  the  bell  was  purchased.  Held,  that  the  note  was  an  offer 
and  could  be  revoked  until  acted  upon  by  purchasing  the  bell.  The  death  of 
the  offerer  revoked  the  offer  and  the  note  could  not  be  collected. 

The  Parties  may  fix  a  time  during  which  the  Offer  will 
remain  Open.  —  If  it  is  not  accepted  within  such  time  the  offer 
lapses.  In  the  absence  of  any  express  limitation  of  time  the 
offer  is  construed  to  be  open  for  a  reasonable  time.  What  con- 
stitutes a  reasonable  time  depends  entirely  upon  the  circum- 
stances of  the  case,  the  relations  of  the  parties,  and  other  facts 
which  would  tend  to  determine  what  would  be  fair  and  just 
under  the  circumstances.  In  some  cases  it  might  be  a  few 
days  and  in  others  a  number  of  months. 

In  Stone  v.  Harmon,  31  Minn.  512,  there  was  a  written  offer  to  sell  certaic 
real  estate  and  no  time  was  stated  for  its  acceptance.  The  court  held  that 
the  offer  remained  open  for  a  reasonable  time  and  that  acceptance  after  nearly 
a  year  was  not  within  a  reasonable  time. 


CO  NSW  ERA  TION- 


7.    CONSIDERATION 


29 


Consideration  in  an  Executory  Contract.  —  Another  element 
necessary  to  support  an  executory  contract  is  what  we  term 
consideration.  There  must  be  some  value  received  to  make  a 
contract  enforceable,  unless  the  terms  thereof  are  fully  carried 
out  or  executed.  Therefore  there  must  be  consideration  in  every 
executory  contract. 

A  contract  under  seal  is  in  a  way,  under  the  common  law,  an 
exception,  for  the  seal  is  said  to  import  a  consideration,  and  the 
instrument  being  sealed,  no  other  evidence  of  consideration  is 
required.  Now,  however,  in  a  few  of  the  states,  the  seal  is  by 
statute  regarded  as  only  a  presumption  of  consideration  in  an 
executory  contract  and  is  not  sufficient  without  some  actual  con- 
sideration. But  if  the  seal  is  used  on  a  gratuitous  promise  for 
the  purpose  of  creating  a  consideration,  the  effect  is  the  same 
as  at  common  law. 

In  Alter  v.  Alter,  40  N.  J.  L.  446,  a  father  gave  his  daughter  a  written 
instrument  under  seal  by  which  he  promised  to  pay  her  $312.  This  was 
understood  to  be  a  part  of  the  money  which  the  father  had  owed  his  wife,  now 
deceased,  and  he  felt  it  should  go  to  the  daughter,  although  there  was  no  legal 
obligation.  The  defense  to  this  promise  was  want  of  consideration.  Held, 
that  as  the  promise  was  intended  to  be  a  gratuitous  one  the  seal  imported 
sufBcient  consideration. 

Consideration  in  an  Executed  Contract.  —  A  contract  that  has 
been  executed  will  not  be  set  aside  because  of  lack  of  considera- 
tion; it  is  therefore  those  contracts  which  have  not  yet  been 
carried  out  that  we  are  to  consider. 

In  Matthews  v.  Smith,  67  N.C.  374,  plaintiff  purchased  of  defendant  a 
quantity  of  fertilizer  and  gave  his  note  for  it.  When  it  became  due  he  said 
the  fertilizer  was  not  good  and  had  injured  his  land ;  still  he  paid  the  note,  and 
then  brought  suit  to  recover  the  money  paid.  Held,  that  as  he  had  paid  the 
money  with  a  full  knowledge  of  the  facts  he  could  not  maintain  his  action. 

Consideration  for  a  Gift.  —  A  familiar  illustration  of  lack  of 
consideration  is  the  case  of  a  gift.  A  mere  promise  to  give  a 
present  is  void  for  want  of  consideration,  but  when  the  promise 


30  CONTRACTS 

is  executed  by  the  delivery  of  the  gift  the  defect  is  remedied, 
and  the  gift  can  not  be  reclaimed. 

In  the  case  of  Brewer  v.  Harvey,  72  N.C.  176,  plaintiff's  father  pointed 
out  a  colt  to  her  when  she  was  but  twelve  years  old  and  said,  "  This  is  your 
property ;  I  give  it  to  you."  It  was  known  by  the  family  as  her  colt,  but  the 
father  kept  possession  of  it  until  he  died.  Plaintiff  brought  an  action  to 
recover  the  horse.  Held,  that  it  being  a  gift,  there  was  no  valuable  considera- 
tion. To  make  the  agreement  valid  there  must  have  been  a  delivery.  There 
having  been  no  delivery,  the  title  did  not  pass  to  the  daughter. 

In  Camp's  Appeal,  36  Conn.  88,  N  handed  C  some  money  to  put  in  the  savings 
bank  for  him,  and  when  the  books  were  brought  back  he  said,  "  I  give  you 
these  bank  books."  C  kept  them,  and  in  an  action  by  N's  administrator  to 
recover  the  books  it  was  held  that  this  was  a  good  delivery,  sufficient  to  con- 
stitute a  complete  gift. 

The  Consideration  must  have  Value.  —  Consideration  defined 
is  said  to  be  a  benefit  to  the  party  promising  or  a  loss  to  the 
party  to  whom  the  promise  is  made. 

It  is  not  necessary  that  the  consideration  be  adequate  in  value 
to  the  thing  promised,  but  it  must  be  of  some  value  in  the  eyes 
of  the  law.  It  will  be  seen  that  it  would  be  impossible  for  the 
courts  to  require  an  adequate  or  full  consideration,  as  they  would 
then  have  to  determine  the  merits  of  every  bargain. 

In  the  case  of  Hamer  v.  Sidway,  124  N.Y.  538,  one  Story  promised  his 
nephew,  Williain,  that  if  he  would  refrain  from  drinking  liquor,  using  tobacco, 
swearing,  and  playing  cards  or  billiards  for  money  until  he  should  become 
twenty-one  years  of  age  he  would  pay  him  $5000.  William  lived  up  to  his 
part  of  the  agreement  and  upon  becoming  of  age  asked  his  uncle  for  payment. 
His  uncle  answered  that  he  had  set  apart  the  money  for  him  in  the  bank.  The 
court  held  that  the  promise  to  pay  this  money  was  founded  upon  a  good  con- 
sideration, as  it  is  enough  that  something  be  done  or  forborne  by  the  party  to 
whom  the  promise  is  made.  He  had  a  right  to  do  these  things  if  he  wished. 
The  suspension  or  forbearance  of  these  legal  rights  sustained  the  agreement. 

Bainbridge  v.  Firmstotte,  8  A.  &  E.  (Eng.)  743,  was  a  case  in  which 
defendant  obtained  plaintiff's  consent  to  let  him  weigh  two  boilers  belonging 
to  plaintiff  and  promised  to  place  them  back  in  the  shape  in  which  he 
found  them.  Defendant  took  the  boilers  apart  and  weighed  them  and  then 
refused  to  put  them  together  again,  claiming  there  was  no  consideration  for 
his  promise  to  put  them  back.  Held,  that  the  plaintiff  gave  up  the  right  which 
he  had,  to  refuse  to  let  them  be  weighed.  There  was  a  detriment  to  plaintiff 
in  parting  with  the  possession  of  them  for  even  so  short  a  time.     This  consti- 


CONSIDER  A  TION 


31 


tuted  a  sutticient  consideration,  and  defendant  was  obliged  to  replace  the 
boilers. 

Wolford  V.  Powers,  85  Ind.  294,  was  an  action  on  a  note  given  in  considera- 
tion of  a  parent  naming  a  child  after  the  maker  of  the  note.  The  court  held 
that  this  was  based  upon  a  sufficient  consideration.  The  parent  surrendered 
his  right  to  name  the  child. 

A  Promise  may  be  a  Sufficient  Consideration.  —  The  con- 
sideration must  come  from  the  promisee,  and  it  may  consist  of 
a  present  act  or  a  promise  in  the  future.  It  may  be  to  give  or 
do  something,  or  to  refrain  from  doing  something  which  the 
promisee  has  a  legal  right  to  do.  For  instance,  a  promise  to 
forbear  suit  and  extend  the  time  of  payment  of  a  claim  is  held 
to  be  a  good  consideration  for  a  promise. 

In  Flanagan  v.  Kilcome,  58  N.H.  443,  defendant  promised  to  pa)'  plaintiffs 
a  certain  sum  if  they  would  drop  a  lawsuit  which  they  had  commenced  against 
her.  This  was  done,  but  she  did  not  pay  it  and  suit  was  brought  for  the  sum 
promised.  It  was  held  that  there  was  a  valuable  consideration  for  the  prom- 
ise, even  though  it  be  shown  that  she  would  have  succeeded  if  the  suit  had 
come  to  trial.     The  plaintiffs  surrendered  their  right  to  have  it  tried. 

In  Pennsylvania  Coal  Co.  v.  Blake,  85  N.Y.  226,  the  firm  of  C.  A.  Blake  & 
Co.  were  indebted  to  plaintiff.  Plaintiff  agreed  to  extend  their  time  of  pay- 
ment upon  receiving,  as  collateral  security,  a  mortgage  upon  land  owned  by 
Elizabeth  Blake,  wife  of  C.  A.  Blake,  who  had  no  interest  in  the  firm.  This 
was  an  action  brought  to  foreclose  that  mortgage.  The  court  held  that  it  was 
made  for  a  good  consideration,  the  consideration  being  the  agreement  on 
the  part  of  plaintiff  to  grant  a  longer  time  to  C.  A.  Blake  &  Co.  and  to  forbear 
to  sue  said  firm. 

Consideration  for  the  Discharge  of  a  Debt.  —  But  the  payment 
of  a  smaller  sum  of  money  in  satisfaction  of  a  larger  one  is  not 
a  valuable  consideration  for  the  discharge  of  a  debt,  as  it  is,  in 
fact,  doing  no  more  than  the  party  is  already  legally  bound  to  do. 
This  is  one  case  in  which  the  court  will  look  into  the  amount  of 
the  consideration  and  determine  whether  or  not  it  is  adequate. 

In  Ayres  v.  C.  R.  I.  Or' P.  R.  Co.,  52  Iowa  478,  one  Q  entered  into  a  contract 
to  build  a  certain  section  of  road  for  defendant.  After  building  a  part  Q  in- 
formed the  defendant  that  he  owed  for  supplies  and  could  not  go  on  at  the 
contract  price.  Defendant  told  him  to  go  on  and  his  actual  expenditures 
would  be  met  and  his  creditors  paid.  Held,  that  the  agreement  was  without 
consideration,  as  it  simply  bound  Q  to  do  what  he  was  already  under  a  legal 
obligation  to  do. 


32  CONTRACTS 

If  something  else  than  money  is  taken  in  part  satisfaction  o^ 
the  debt,  the  rule  will  be  different. 

This  is  seen  in  the  case  oi  J  affray  v.  Davis,  124  N.Y.  164,  in  which  de- 
fendant, who  was  owing  plaintiff  a  certain  amount  on  open  account,  gave  to 
plaintiff  his  promissory  note  for  one  half  the  amount  secured  by  a  chattel 
mortgage  under  an  agreement  that  it  would  be  accepted  as  payment  in  full. 
Held,  that  this  was  a  valid  agreement  upon  suflScient  consideration  and  that 
action  could  not  be  brought  for  the  balance.  Here  defendant  gave  extra 
security  and  deprived  himself  of  the  legal  title  to  the  goods  so  mortgaged. 

In  Wharton  v.  Anderson,  28  Minn.  301,  defendant  leased  premises  of 
plaintiff  for  live  years  at  $250  per  month.  Thereafter  plaintiff  agreed  to  a 
certain  reduction  in  consideration  of  defendant's  paying  promptly.  Held,  that 
the  promise  to  take  less  was  without  consideration  and  could  not  be  enforced. 

But  if  the  amount  due  is  in  dispute,  the  promise  to  pay  any 
sum  in  settlement  of  the  disputed  claim  is  valid,  even  though 
such  sum  be  less  than  that  actually  due.  The  liquidation  of  the 
claim  constitutes  a  good  consideration. 

Riley  v.  Kershaw,  52  Mo.  224,  was  an  action  to  recover  rent  and  taxes 
alleged  to  be  due.  The  defense  was  that  a  new  agreement  had  been  entered 
into  between  the  parties,  by  which,  in  consideration  of  the  defendant's  paying 
the  rent  monthly  instead  of  quarterly,  a  smaller  sum  was  stipulated  to  be  paid, 
and  that  this  smaller  sum  was  actually  paid  in  full  satisfaction  of  all  claims. 
Held,  that  the  payment  of  a  part  of  a  debt  is  no  satisfaction  of  the  whole  debt, 
even  although  agreed  to  be  taken  as  such.  But  in  case  of  a  dispute  a  com- 
promise fairly  made  and  faithfully  carried  out  will  be  upheld. 

Accord  and  Satisfaction.  —  This  is  the  settlement  of  a  claim  by 
compromising  the  amount  which  is  in  dispute,  or  by  giving  some- 
thing else  than  that  which  was  originally  agreed  upon. 

Lee  V.  Timken,  23  App.  Div.  (N.Y.)  349,  was  a  case  where  plaintifTs  hus- 
band before  his  death  transferred  to  plaintiff  certain  real  estate  which  was 
subject  to  a  mortgage  of  $10,000,  and  gave  other  property  to  the  defendant,  his 
daughter,  upon  her  agreement  to  pay  off  and  discharge  the  mortgage.  The 
widow  sued  for  $6000,  which  she  claimed  to  be  due  under  the  agreement,  and 
alleged  taat  $4000  had  been  paid.  The  defense  was  accord  and  satisfaction  — 
that  this  $4000  had  been  paid  and  accepted  in  full  satisfaction  of  the  daughter's 
obligations.  The  court  held  that  the  defense,  if  true,  was  a  good  answer  to 
the  complaint,  as  the  payment  direct  to  the  mother  instead  of  applying  it  on 
the  mortgage  was  a  sufficient  consideration  to  support  the  agreement  to  accept 
it  in  full  payment.    So  accord  and  satisfaction,  if  proved,  was  a  good  defense. 


CONS  ID  ERA  TION  ,  ^ 

Settlement  to  avoid  Litigation.  —  A  settlement  to  avoid  liti- 
gation, where  the  party  forbears  to  sue  or  consents  to  drop  a 
pending  suit,  is  a  good  consideration,  and  the  promise  made  for 
this  consideration  can  be  enforced. 

In  Parker  v.  Enslow,  102  111.  272,  plaintiff  had  been  in  the  habit  of  going 
into  defendant's  store  and  filling  his  pipe  from  tobacco  left  on  the  counter  for 
the  use  of  the  public.  Defendant,  for  a  joke,  mixed  powder  with  the  tobacco, 
and  when  the  plaintiff  lit  it  an  explosion  followed  and  injured  his  eyesight. 
Plaintiff  threatened,  and  was  intending  to  sue  defendant.  As  a  compromi.se 
and  settlement  of  this  cause  of  action,  defendant  gave  plaintiff  the  promissory 
note  here  sued  upon.  The  court  held  that  as  the  note  was  given  in  settlement 
of  a  threatened  suit,  if  the  payee  supposed  or  believed  that  he  had  a  cause  of 
action  and  the  note  was  given  and  accepted  in  good  feith  as  a  compromise,  it 
was  supported  by  a  suffircient  consideration  and  could  be  enforced. 

Compromise  with  Creditors.  —  If  several  creditors  of  a  party 
agree  with  each  other  and  with  the  debtor  to  accept  a  part  of 
what  he  owes  each  of  them  in  discharge  of  the  whole  debt,  the 
forbearance  of  each  one  is  the  consideration  to  the  others,  who 
might  otherwise  lose  the  whole.  A  compromise  with  creditors  is 
therefore  held  to  be  for  a  good  consideration,  and  such  an  agree- 
ment can  be  enforced. 

In  Pierce  v.  Jones,  8  S.C.  273,  Jones  &  Co.,  an  insolvent  firm,  entered 
into  a  written  agreement  with  their  creditors  whereby  the  creditors  were  to 
accept  twenty-five  cents  on  the  dollar  in  payment  of  their  several  claims  and 
give  receipts  in  full,  provided  that  all  of  the  creditors  assented  to  the  agree- 
ment. Held,  that  this  was  a  valid  agreement,  and  that  the  firm  by  complying 
therewith  was  discharged  from  the  balance  of  the  indebtedness. 

Consideration  for  Extension  of  Time.  —  But  a  promise  to  extend 
the  time  of  payment  of  a  debt  already  due  is  void  for  want  of 
consideration  unless  the  debtor  makes  some  concession ;  as,  giv- 
ing some  security,  paying  interest  in  advance,  or  doing  something 
that  will  form  a  consideration  for  the  promise  to  extend  the  time. 

Warner  v.  Campbell,  26  111.  282,  held,  that  an  agreement  to  extend  the  time 
of  payment  of  a  promissory  note  upon  the  payment  of  the  interest  in  advance 
is  valid,  as  it  is  founded  upon  a  valuable  consideration- 
Moral  Obligations.  —  A  distinction  is  sometimes  made  between 
"  good  "  consideration  and  "  valuable  "  consideration.  In  defin- 
ing these  terms,  Blackstone  says,  "  A  good  consideration  is  such 

COM.  LAW    —  3 


34  CONTRACTS 

as  that  of  blood,  or  of  natural  love  and  affection,  when  a  man 
grants  an  estate  to  a  near  relative ;  being  founded  on  motives  of 
generosity,  prudence,  and  natural  duty  ;  a  valuable  consideration 
is  such  as  money,  marriage,  or  the  like,  which  the  law  esteems 
an  equivalent  given  for  the  grant :  and  is  therefore  founded  on 
motives  of  justice." 

Accordingly  it  was  held  by  some  old  authority  that  a  moral 
obligation  was  a  sufficient  consideration  to  make  a  promise  valid. 

But  the  courts  are  now  practically  united  on  the  point  that 
neither  a  moral  obligation  nor  a  "  good  "  consideration  is  suffi- 
cient to  make  a  promise  valid  and  enforceable  at  law. 

In  the  case  of  McElven  v.  Sloan,  56  Ga.  208,  Sloan  &  Co.  sued  McElven 
Bros,  on  a  promissory  note  given  by  them,  the  consideration  for  which  was  the 
payment  of  a  note  against  their  father,  who  was  dead.  Before  his  death  the 
father  had  become  insolvent  and  had  gone  through  bankruptcy.  Held,  that 
this  claim  against  their  father  did  not  impose  such  an  obligation  upon  them 
as  to  constitute  a  valid  consideration  to  support  the  new.  note  given. 

The  Consideration  must  be  Legal.  —  The  doing  or  promising 
to  do  an  illegal  act  is  not  sufficient  consideration  to  support  an 
agreement. 

In  McBratney  v.  Chandler,  22  Kan.  692,  plaintiff  sued  for  services  in  pre- 
senting the  claim  of  the  Miami  Indians  at  Washington.  It  was  contended  that 
the  services  were  those  of  a  lobbyist  and  illegal.  The  court  held  it  was  for 
the  jury  to  decide  whether  the  services  were  those  of  an  attorney  in  drawing 
papers  and  making  agreements,  or  of  a  lobbyist  in  influencing  the  legislators. 
If  the  former,  he  could  recover;  if  the  latter,  the  consideration  was  illegal  and 
void,  and  he  could  not  recover.  If  for  both,  the  illegal  part  of  the  considera- 
tion vitiated  and  avoided  the  whole  contract. 
\ 

A  Consideration  must  be  Possible.  — A  promise  to  do  an  im- 
possible act  is  never  a  sufficient  consideration  to  support  a 
promise.  This  does  not  mean  a  mere  pecuniary  impossibility, 
but  an  obvious  physical  impossibility.  The  non-existence  of  the 
thing  given  as  consideration  would  render  the  consideration  void 
and  a  promise  made  thereon  invalid. 

Gibson  v.  Pelkie,  37  Mich.  380,  was  an  action  on  an  agreement  concerning 
a  judgment  which  plaintiff  was  to  collect,  retaining  one  half  for  his  services. 
It  appeared  that  no  such  judgment  existed.  Held,  that  as  the  subject-matter 
of  the  contract  was  not  in  existence  there  was  no  valid  contract. 


i 


REALITY  OF  CONSENT— MISTAKE  35 

In  Rogers  v.  Walsh,  12  Neb.  28,  plaintiff  bought  of  defendant  what  she 
supposed  were,  and  what  appeared  to  be,  tax  warrants  of  York  County,  but 
being  issued  by  the  county  commissioner  without  authority,  they  were  void. 
There  was  an  action  to  recover  the  price  paid.  Held,  she  might  recover,  for 
while  the  articles  she  bought  resembled  county  bonds,  they  were  really  worth- 
less paper  and  the  tax  warrants  did  not  exist.  The  agreement  was  therefore 
void  for  want  of  consideration. 

The  Consideration  must  be  Present  or  Future.  —  A  past  con- 
sideration is  no  consideration  at  all,  for  it  confers  no  value.  It 
is  simply  some  act  or  forbearance  in  time  past,  which  has  been 
conferred  without  incurring  any  legal  liability.  If  afterwards, 
from  a  feeling  of  thankfulness  or  good  will,  a  promise  is  made 
to  the  person  by  whose  acts  or  forbearance  the  promisee  has  been 
benefited,  such  promise  is  gratuitous  and  can  not  be  enforced. 

In  Summers  v.  Vaughan,  35  Ind.  323,  plaintiff  sold  defendant  an  engine  and 
machinery  and  took  a  note  for  same.  This  action  was  to  recover  on  the  note. 
Defendant  claimed  that  after  the  sale  the  plaintiff  had  warranted  the  machinery, 
whereas  in  fact  it  was  defective.  The  court  refused  to  consider  such  a  war- 
ranty, as,  being  made  after  completion  of  the  contract  of  sale,  which  was  in 
writing,  it  was  without  consideration  and  void. 

In  Dearborn  v.  Bowman,  3  Met.  (Mass.)  155,  Bowman  was  nominated  for 
senator.  Plaintiff  rendered  services  and  furnished  literature  to  advance  de- 
fendant's cause,  but  without  any  solicitation  on  defendant's  part.  After  the 
election  defendant  gave  plaintiff  his  note  for  $60  for  such  services.  The  court 
held  that  the  note  was  void  for  want  of  consideration.  Past  performance  of 
services  constitutes  no  consideration  for  an  express  promise,  unless  the  services 
were  performed  at  the  express  or  implied  request  of  the  defendant. 

But  if  there  has  been,  either  expressly  or  impliedly,  a  request 
for  the  act  or  forbearance  beforehand,  the  consideration  for  a 
promise  to  pay  afterwards  will  be  valid,  because  it  is  then  evi- 
dent that  the  act  was  not  intended  to  be  a  gratuity,  and  the 
whole  is  but  one  transaction. 


80    REALITY  OF  CONSENT  — MISTAKE 

Mistake.  —  After  the  parties  have  entered  into  the  apparent 
agreement,  the  questions  arise  as  to  whether  the  minds  of  the 
parties  have  met  on  the  same  thing  in  the  same  sense,  and 


36  CONTRACTS 

whether  the  consent  of  both  parties  was  given  under  such  cir- 
cumstances as  to  make  it  a  real  expression  of  intention. 

The  parties  may  not  have  meant  the  same  thing.  It  may  not 
have  been  the  intent  of  one  or  both  of  two  parties  to  make  a 
contract  into  which  they  have  been  brought  by  the  misrepre- 
sentations of  a  third  party.  Should  such  a  condition  be  occa- 
sioned by  the  carelessness  of  either  party,  he  is  not  excused ; 
as  when  a  man,  able  to  read,  signs  a  contract  thinking  it  is 
something  different  from  what  it  really  is. 

Walker  v.  Ebert,  29  Wis.  194,  was  an  action  on  a  promissory  note.  De- 
fendant proved  that  at  the  time  he  signed  the  note  he  was  unable  to  read 
or  write  the  English  language,  and  that  it  was  represented  to  him,  and  he 
believed  it  to  be,  an  agreement  in  reference  to  a  patented  machine,  about  which 
the  party  to  whom  he  gave  the  note  had  been  talking  to  him.  Held  that  the 
note,  having  been  procured  by  false  representations  as  to  the  character  of  the 
instrument  itself,  and  the  maker  being  ignorant  of  its  character  and  having  no 
intention  to  sign  such  a  paper,  the  note  was  void. 

The  mistake  as  to  the  nature  of  the  transaction  must  be  mutual 
and  must  arise  from  some  deceit  which  ordinary  diligence  could 
not  foresee  or  from  some  accident  which  ordinary  diligence 
could  not  avert. 

Nevius  v.  Dunlap,  33  N.Y.  676,  was  an  action  brought  to  reform  a  bond. 
The  court  held  that  to  entitle  plaintiff  to  a  decree  reforming  a  written  instrument 
he  must  show  that  the  part  omitted  or  inserted  in  the  instrument  was  omitted 
or  inserted  contrary  to  the  intent  of  both  parties  and  under  a  mutual  mistake. 

Again,  the  mistake  may  be  in  the  identity  of  the  one  with 
whom  the  party  deals.  X  may  enter  into  a  contract,  thinking 
and  intending  to  contract  with  Y,  when  in  fact  he  has  been 
dealing  with  Z.  There  is  no  meeting  of  their  minds,  for  X  never 
contemplated  dealing  with  Z. 

Boston  Ice  Co.  v.  Potter,  123  Mass.  28,  was  an  action  for  the  price  of  ice 
furnished  to  defendant  from  April  i,  1874,  to  April  i,  1875.  The  defendant 
was  supplied  with  ice  by  plaintiff  in  1873  '^"d,  becoming  dissatisfied,  terminated 
his  contract  and  made  a  new  one  with  the  Citizens  Ice  Company.  Just  before 
April,  1875,  this  company  sold  out  to  plaintiff.  The  court  found  that  the 
defendant  had  no  notice  of  the  change.  Held,  the  plaintiff  could  not  recover, 
as  there  was  no  meeting  of  the  minds  of  these  parties  to  this  action.  A  man 
has  a  right  to  select  and  determine  the  persons  with  whom  he  will  deal,  and 
can  not  have  others  thrust  upon  him  without  his  consent. 


REALITY  OF  CONSENT— MISTAKE 


37 


There  may  be  a  mistake  as  to  the  subject-matter  of  the  thing 
contracted  for,  as  where  one  party  contracts  expecting  to  receive 
one  article  and  the  other  party  thinks  the  agreement  refers  to 
another.  The  parties  clearly  have  not  agreed  upon  the  same 
thing  and  the  agreement  is  void. 

Kyle  V.  Kavanagh,  103  Mass.  356,  was  an  action  to  recover  for  the  pur- 
chase price  of  land.  It  transpired  that  the  defendant  was  negotiating  for  one 
piece  of  land  and  the  plaintiff  was  selling  another.  It  was  held  by  the  court 
that,  as  their  minds  did  not  meet  on  the  subject-matter,  they  could  not  be  said 
to  have  entered  into  a  contract,  and  although  there  was  no  fraud  on  the  part 
of  the  plaintiff,  the  mistake  alone  was  a  good  defense. 

The  mistake  may  be  as  to  the  existence  of  the  thing  con- 
tracted for. 

I. 

In  Thwing  v.  Hall,  40  Minn.  184,  plaintiff  made  a  contract  to  sell  certain 
timber  lands  to  defendant,  thinking  they  contained  seven  million  feet  of  fine 
lumber,  defendant  also  believing  there  was  good  lumber  there.  The  facts 
were  that,  unknown  to  either  party,  the  land  had  been  practically  stripped  of 
good  lumber.  Defendant  sent  a  man  who  mistook  the  location  and  reported 
good  timber.  Held,  a  mutual  mistake,  which  was  a  sufficient  cause  for  the 
court  to  cancel  the  contract.  There  was  a  mistake  as  to  the  existence  of  the 
thing  contracted  for. 

There  may  be  a  mistake  by  one  party  as  to  the  intention  of 
the  other.  In  such  a  case  it  appears  that  if  the  second  party 
knows  that  the  first  party  is  mistaken  in  his  intention  the 
contract  is  void. 

In  Parrish  v.  Thurston,  87  Ind.  437,  plaintiff  sold  to  defendant  a  buggy  and 
harness  and  received  a  promissory  note  signed  "E.  K.  Parrish."  There  was 
a  man  by  that  name  living  near  Shelbyville,  the  place  where  the  sale  was 
made,  who  was  wealthy  and  was  known  to  both  parties.  The  note  was  really 
made  by  E.  K.  Parrish  of  Hamilton  County,  a  man  entirely  unknown  to  plain- 
tiff. Plaintiff  supposed  he  was  getting  a  note  signed  by  the  man  from  Shelby- 
ville, and  the  defendant  knew  that  plaintiff  believed  this.  As  soon  as 
plaintiff  learned  the  truth  he  tendered  back  the  note  and  sought  to  rescind 
the  contract.  Held,  that  the  contract  could  be  rescinded,  as  the  silence  of 
defendant,  when  honesty  required  him  to  correct  the  mistake  of  plaintiff, 
amounted  to  fraud. 

The  cases  make  the  following  distinction  :  If  the  second  party 
knows  that  the  first  party  is  under  a  misapprehension  as  to  what 


38  CONTRACTS 

the  first  party  is  getting,  the  contract  is  not  voided,  but  if  the 
first  party  is  under  a  misapprehension  as  to  what  is  promised  by 
the  second  party,  and  the  second  party  knows  of  the  misappre- 
hension, the  contract  is  void. 

In  Smith  v.  Hughes,  L.  R.  6  Q.  B.  (Eng.)  597,  plaintiff  offered  to  sell  de- 
fendant some  oats,  and  showed  a  sample.  Defendant  wrote  the  next  day  that 
he  would  take  them  at  the  price  named.  He  afterwards  refused  to  take  the 
oats  on  the  ground  that  they  were  new  oats  and  he  thought  he  was  buying 
old  oats.  Nothing  had  been  said  at  the  time  of  the  sale  about  their  being  old 
oats,  but  the  price  was  high  for  new  oats.  Held,  that  in  order  to  relieve  the 
defendant  from  liability  it  was  necessary  to  show  not  only  that  the  plaintiff 
believed  the  defendant  thought  that  he  was  buying  old  oats,  but  that  the 
plaintiff  believed  the  defendant  thought  the  plaintifi  was  contracting  to  sell 
old  oats. 

Misrepresentation.  —  Misrepresentation  is  defined  as  an  inno- 
cent misstatement  of  fact  as  distinguished  from  fraud  or  a  willful 
misstatement,  and  as  thus  defined  it  is  almost,  if  not  entirely, 
identical  with  mistake. 

A  party  in  making  a  misstatement,  either  does  it  willfully, 
which  is  fraud,  or  does  it  innocently,  which  is  a  mistake ;  still 
many  writers  and  judges  make  a  distinction  between  misrepre- 
sentation and  mistake. 


9.  REALITY  OF  CONSENT  —  FRAUD 

Fraud  Defined.  —  Fraud  is  a  false  representation  of  fact,  made 
either  with  a  knowledge  of  its  falsity  or  recklessly,  with- 
out belief  in  its  truth,  with  the  intention  of  having  it  acted 
upon  by  the  complaining  party,  and  actually  inducing  him  to  act 
upon  it.  Aside  from  vitiating  the  contract,  fraud  is  an  action- 
able wrong,  and  the  party  guilty  of  fraud  is  liable  for  deceit. 

Fraud  may  be  actual. 

In  Holmes's  Appeal,  "jj  Pa.  St.  50,  a  party  about  to  purchase  a  farm  asked 
the  owner  whether  the  neighborhood  was  sickly  or  not,  and  declined  to  pur- 
chase if  it  was.  The  owner  assured  him  that  it  was  free  from  sickness, 
whereas  fever  and  ague  were  prevalent  in  the  locality.  The  court  held  that 
the  agreement  to  purchase  could  not  be  enforced,  it  having  been  induced  by 
the  vendor's  misrepresentations. 


REALITY  OF  CONSENT— FRAUD  39 

Fraud  may  also  arise  where  there  is  active  or  artful  conceal- 
ment. 

Jones  V.  Edwards,  i  Neb.  170,  was  an  action  brought  for  damages  because 
of  alleged  fraud  in  tlie  sale  of  a  horse.  Jones  bought  the  horse  when  he  had  a 
Sweeney,  stiffness  in  the  neck,  and  other  ailments.  He  cut  the  cords  of  his 
neck  and  doctored  him  up.  Later  Edwards  came  and  wanted  to  buy  a  farm 
team.  Jones  said  he  had  what  he  wanted,  and  showed  him  this  one  and 
another  horse,  saying  they  were  sound,  as  far  as  he  knew,  but  that  he  never 
warranted  a  horse.  He  did  not  say  a  word  as  to  the  former  ailments.  Held, 
that  it  was  fraud  on  the  part  of  Jones  in  not  acquainting  the  defendant, 
Edwards,  with  conditions  affecting  the  value  of  the  horse,  which,  if  known, 
would  have  prevented  defendant  from  buying. 

One  who  conceals  a  fact  which  he  ought,  as  a  legal  duty,  to 
disclose  is  guilty  of  fraud. 

Smith  V.  jEtna  Life  Insurance  Company,  49  N.Y.  211,  was  an  action  upon 
a  life  insurance  policy.  The  defense  was  fraud  in  obtaining  it.  In  the  phy- 
sician's examination  it  was  asked  whether  insurer  had  cough,  occasional  or 
habitual  expectoration,  or  difficulty  in  breathing.  The  answer  was,  "  No 
cough ;  walking  fast  upstairs  or  up  hill  produced  difficulty  in  breathing." 
The  facts  were  ,that  he  had  raised  blood  for  two  and  one-half  years  and  that 
he  died  three  months  after  the  policy  was  issued.  Held,  that  there  was  a 
fraudulent  concealment  and  misrepresentation  which  would  avoid  the  policy. 

The  false  representation  may  arise  from  the  suppression  of 
the  truth,  amounting  to  the  suggestion  of  a  falsehood. 

In  Grigsby  v.  Stapleton,  94  Mo.  423,  plaintiff  sold  defendant  a  herd  of  cattle 
at  the  ordinary  market  price,  knowing  that  they  had  Texas  fever,  a  disease  not 
easily  detected  by  one  having  had  no  experience  with  it.  He  did  not  disclose 
this  to  defendant.  Held,  that  plaintiff  was  guilty  of  a  fraudulent  concealment, 
for  which  he  was  lia"ble. 

Caveat  Emptor.  —  In  a  sale  of  goods  in  which  the  buyer  can 
inspect  them  the  rule  of  caveat  emptor  is  said  to  apply.  The 
term  means,  "let  the  buyer  beware,"  and  its  application  de- 
notes that  a  vendor  is  under  no  obligation  to  communicate  the 
existence  of  even  latent  defects  in  his  wares  unless,  by  act  or 
implication,  he  represents  that  such  defects  do  not  exist. 

In  Lucas  v.  Coulter,  104  Ind.  81,  defendant  leased  certain  premises  for  one 
year  and  defended  an  action  for  rent  on  the  ground  that  they  became  unfit  for 
bis  business.     It  appeared  that  the  woodwork  shrank  and  cracked  the  plaster, 


40  CONTRACTS 

causing  dust  to  fall  on  the  musical  instruments  which  defendant  kept  in  stock. 
Plaintiff  made  no  representations  or  warranties.  Held,  there  was  no  implied 
warranty  and  the  tenant  must  determine  for  himself,  before  engaging  the 
premises,  as  to  their  safety  and  fitness  for  his  business. 

Effect  of  Non-disclosure.  —  Mere  non-disclosure  does  not  vitiate 
a  contract  unless  the  parties  stand  in  a  relation  of  confidence  to 
each  other,  and  one  party  has  the  means  of  knowing  facts  that 
are  inaccessible  to  the  other.  He  is  then  bound  to  tell  every- 
thing that  is  likely  to  affect  the  other  party's  judgment.  Such 
contracts  are  said  to  be  tiberrima  fides  contracts,  that  is,  they 
require  the  "  utmost  good  faith,"  such  as  contracts  of  fire  and 
life  insurance  and  for  the  sale  of  land. 

In  King  v.  Knapp,  59  N.  Y.  462,  plaintiff  purchased  of  defendant  at  an  auction 
sale  a  lot  in  New  York  City,  paying  ten  per  cent  down.  Printed  handbills 
were  circulated  containing  a  diagram  of  the  lot,  which  represented  it  to  be 
25  X  100  feet,  the  handbill  also  stating  this  to  be  the  size.  Relying  on  the 
description,  the  plaintiff  purchased  the  premises  without  inspection.  As  a 
matter  of  fact  a  building  upon  the  adjoining  lot,  which  had  stood  there  lor  over 
twenty-five  years,  encroached  upon  the  premises.  This  was  known  to  the 
defendant,  but  there  was  no  mention  of  it  in  the  handbills  or  at  the  sale. 
Plaintiff  refused  to  complete  the  sale  and  brought  this  action  to  recover  the 
amount  paid.  Held,  the  plaintiff  had  bought  under  the  suppression  of  a 
material  fact,  and  the  contract  could  not  be  upheld. 

It  is  held  also  in  contracts  for  the  sale  of  shares  of  stock  in  a 
company  that  the  utmost  candor  and  fullness  of  statement  are 
required  of  the  promoter  and  of  those  who  make  statements 
upon  the  strength  of  which  purchasers  subscribe. 

In  Brewster  v.  Hatch,  122  N.Y.  349,  defendants  acquired  options  on  certain 
mining  land.  A  prospectus  was  then  issued  describing  the  property  and  set- 
ting forth  the  terms  and  conditions  upon  which  a  company  was  to  be  organized. 
The  proposed  capital  stock  was  $1,500,000,  divided  into  shares  of  $ro  each. 
Plaintiff  and  others  subscribed  for  about  61,000  shares,  and  the  company  was 
organized  and  completed  the  purchase  of  the  land.  After  paying  the  cost  of 
purchase  and  other  expenses,  there  remained  on  hand  58,235  shares  of  stock, 
which  were  divided  among  the  defendants,  as  previously  agreed,  and  for  which 
they  paid  nothing.  When  plaintiffs  subscribed  they  did  not  know  that  de- 
fendants were  to  receive  any  stock  without  paying  for  it.  This  was  an  action 
to  recover  for  the  benefit  of  the  corporation  the  value  of  the  sliares  so  dis- 
tributed.   Held,  that  the  plaintiffs  were  led  to  believe  that  the  defendants 


REALITY  OF  CONSENT— FRAUD  4 1 

were  acting  in  the  interest  of  all  the  investors  and  that  defendants  knew  the 
plaintiffs  so  believed ;  that  the  relations  of  the  parties  were  those  of  trust  and 
confidence,  binding  the  defendants  to  the  exercise  of  good  faith  and  requiring 
them  to  disclose  the  information  they  possessed  affecting  the  value  of  the 
property. 

The  statement  must  be  a  misrepresentation  of  fact.  A  mere 
expression  of  opinion  which  turns  out  to  be  without  foundation 
or  a  statement  of  intention  which  is  not  carried  out  will  not 
invalidate  the  contract. 

In  Gordon  v.  Butler,  105  U.S.  553,  defendant  borrowed  money  of  plaintiff 
and  gave  as  security  a  mortgage  upon  real  estate  containing  some  sandstone 
quarries  which  had  not  been  sufficiently  worked  to  show  their  value.  Defend- 
ant furnished  the  certificates  of  two  persons,  saying  they  had  lived  near  the 
place  for  twenty  years  and  giving  the  value  of  the  property  in  their  best  judg- 
ment to  be  an  amount  one  hundred  and  fifty  per  cent  more  than  the  loan. 
Upon  a  sale  under  foreclosure  the  land  brought  one-sixth  of  the  amount  of  the 
loan.  Plaintiff"  sued,  charging  fraud.  Held,  he  could  not  recover;  that  an 
action  will  not  lie  for  an  expression  of  opinion,  however  inaccurate,  in  regard 
to  the  value  of  property  which  depends  upon  contingencies  that  may  never 
happen. 

The  representation  must  be  a  statement  of  something  that 
exists  or  has  happened ;  for  instance,  that  a  wagon  cost  $50  and 
not  that  the  wagon  is  worth  ^50,  which  would  be  a  statement  of 
opinion ;  or  that  if  you  buy  this  wagon  you  can  sell  it  again  in 
the  spring  for  $50,  as  this  is  merely  a  prediction  for  the  future. 

The  law  tolerates  considerable  prevaricating  by  the  tradesman, 
in  the  matter  of  puffing  his  goods  or  wares,  provided  the  thing 
bargained  for  is  open  to  the  inspection  of  the  buyer. 

Poland  v.  Brownell,  131  Mass.  138,  was  a  case  in  which  plaintiff"  bought 
out  a  half  interest  in  defendant's  stock  of  goods  and  business.  He  looked 
over  the  stock  and  books  and  had  ample  opportunity  to  investigate.  Held 
t!\at  he  had  no  right  to  hold  the  seller  upon  his  representations  of  the  value 
of  the  goods  or  the  amount  of  business  he  had  previously  done.  The  Judge 
said,  '•  It  is  everywhere  understood  that  such  statements  and  commendations 
are  to  be  received  with  great  allowance  and  distrust."  (This  case  is  another 
illustration  of  the  rule  of  caveat  emptor.) 

The  representation  in  order  to  render  the  contract  void  because 
of  fraud,  must  be  made  with  a  knowledge  of  its  falsity  or  with- 
out belief  in  its  truth. 


42  CONTRACTS 

Cowley  V.  Dobbins,  136  Mass.  401,  was  an  action  for  fraud  in  that  defendant    '< 
represented  to  plaintiff  that  William  Dobbins  left  an  estate  of  $40,000  above 
all  liabilities,  whereas  in  truth  he  was  insolvent.     The  evidence  showed  that 
defendant  believed  her  representations  to  be  true.     Held,  no  action  would  lie 
against  her. 

If  a  man  makes  a  false  statement,  honestly  believing  it  to  be 
true,  he  is  not  liable  for  fraud.  He  can  be  held  only  when  he 
knows  it  to  be  false  or  has  no  knowledge  either  of  its  truth  or 
falsity.  The  false  statement  must  be  made  with  the  intention 
of  its  being  acted  upon.  It  need  not  be  intended  that  the  party 
to  whom  it  is  made  shall  act  upon  it  but  that  he  shall  lead  some 
one  to  act. 

In  Eaton  v.  Avery,  83  N.Y.  31,  defendant  made  false  rep.esentations  to  a 
mercantile  agency  as  to  the  financial  responsibility  of  the  firm  of  Avery  & 
Reggins,  of  which  he  was  a  member.  This  firm  asked  credit  of  plaintiff". 
Plaintiff"  went  to  the  mercantile  agency  and  obtained  the  information  given  by 
defendant,  and  relying  on  this  he  extended  the  firm  credit.  In  an  action  for 
fraud  it  was  held  that  the  purpose  for  which  such  information  is  given  to 
mercantile  agencies  is  to  enable  them  to  furnish  it  to  their  subscribers  for 
guidance  in  extending  credit  ;  and  that  the  defendant  would  therefore  be 
liable,  as  the  case  justified  the  finding  that  the  false  statements  were  made 
with  the  intent  to  defraud  any  person  who  might  inquire  of  the  agency. 

Sheldon  v.  Davidson,  85  Wis.  138,  was  an  action  for  deceit  in  which  it  was 
claimed  that  the  defendant,  in  order  to  induce  plaintiff"  to  lease  certain  prem- 
ises, concealed  the  fact  that  a  barn  thereon  did  not  belong  to  him.  But  it 
was  not  shown  that  this  concealment  induced  plaintiff"  to  lease  the  premises 
and  for  this  reason  it  was  held  that  an  action  would  not  lie. 

The  false  representation  therefore  must  actually  deceive,  as 
in  the  case  of  Eaton  v.  Avery.  If  Eaton  had  not  been 
deceived  by  the  information,  he  could  not  have  succeeded 
in  his  suit. 

The  effect  of  fraud  on  a  contract  is  to  give  the  injured  party 
grounds  for  an  action  for  damages  for  deceit.  And  the  person 
who  has  been  led  into  a  contract  by  means  of  the  fraudulent 
misrepresentations  may  either  affirm  the  contract  and  compel 
the  fulfillment  of  the  agreement  or  he  may  avoid  it,  provided 
that  he  signifies  his  intention  to  do  so  as  soon  as  he  becomes 
aware  of  the  fraud.  If  he  accepts  any  benefits  under  the  con- 
tract aft^r  he  learns  of  the  fraud,  the  contract  is  affirmed. 


REALITV  OF  CONSENT— FRAUD  43 

Crooks  V.  Nippolt,  44  Minn.  239,  was  an  action  brought  to  recover  the 
amount  paid  by  plaintiff  on  a  contract  to  buy  a  certain  piece  of  real  estate,  on 
the  ground  that  defendant's  agent  in  making  the  sale  showed  plaintiff  another 
and  more  valuable  lot  instead  of  the  one  sold.  It  appeared  that  after  plaintiff 
learned  of  this  he  applied  to  defendant  twice  for  an  extension  of  time  within 
which  to  carry  out  his  contract  as  to  another  payment.  He  also  endeavored 
to  have  the  contract  acknowledged  so  that  it  might  be  recorded.  Held  that 
he  should  have  rescyided  upon  the  discovery  of  the  fraud,  and  that  his  acts, 
after  knowledge  of  tbe  fraud,  amounted  to  an  affirmance  and  terminated  the 
right  to  rescind. 

Duress.  —  Duress  is  defined  to  be  some  unlawful  constraint 
exercised  upon  a  man  whereby  he  is  forced  to  do  some  act 
against  his  will.  It  is  actual  or  threatened  violence  or  imprison- 
ment. 

A  contract  entered  into  by  a  party  under  duress  is  voidable 
at  his  option.  The  duress  must  be  inflicted  or  threatened  by  a 
party  to  the  contract  or  one  acting  for  him  and  with  his  knowl- 
edge, and  the  subject  of  the  duress  must  be  the  contracting 
party  himself  or  his  wife,  parent,  or  child. 

In  Morrill  v.  Nightingale,  93  Cal.  452,  plaintiff  procured  several  promissory 
notes  to  be  executed  by  defendant  under  coercion  and  intimidation,  caused  by 
threats  of  arrest,  and  he  also  had  a  warrant  of  arrest  issued  by  a  Justice  of  the 
Peace  not  for  the  purpose  of  punishing  defendant  for  a  crime  but  to  compel 
him  to  pay  the  money  or  execute  the  notes.  Held  that  this  constituted  duress 
and  was  a  good  defense  to  the  action  to  recover  on  the  notes. 

Wrongful  detention  of  goods  or  damage  to  them  does  not  con- 
stitute duress,  nor  does  threatened  arrest  in  lawful  prosecution. 

Undue  Influence.  —  In  the  creation  of  a  contract  undue  influ- 
ence arises  where  the  parties  are  not  on  an  equality  as  to  knowl- 
edge or  capacity. 

A  promise  made  by  a  child  to  its  parent,  a  client  to  his  attorney, 
a  patient  to  his  physician,  a  ward  to  his  guardian,  or  a  person 
to  his  spiritual  adviser,  will  not  necessarily  be  set  aside  by  the 
court,  but  such  relations  call  for  clear  evidence  that  the  party 
benefited  did  not  take  advantage  of  his  position. 

Hallv.  Perkins,  3  Wend.  (N.Y.)  626,  was  a  case  in  which  a  simple-minded, 
ignorant  young  man  was  induced  by  his  uncle,  a  justice  court  lawyer,  to  accept 
a  conveyance  of  land  worth  $240  in  satisfaction  of  a  claim  of  $500.     The 


44  CONTRACTS 

uncle  was  one  of  the  executors  of  the  estate  which  owed  plaintiff.  Held,  that 
from  the  nature  of  the  transaction,  the  inadequacy  of  the  consideration,  the 
relative  character,  capacity,  and  connection  of  the  parties,  fraud  and  imposi- 
tion might  well  be  presumed. 

Bambrigge  v.  Browne,  i8  Ch.  Div.  (Eng.)  i88,  was  an  action  to  set  aside 
a  deed  given  by  children,  who  were  of  age,  to  their  father.  The  court  held, 
that  the  father  must  show  that  the  deed  was  executed  with  a  full  knowledge 
of  its  contents  and  with  a  free  intention  of  giving  the  benefit  conferred. 

Undue  influence,  like  duress,  renders  the  contract  voidable  at 
the  instance  of  the  injured  party. 

lo.    SUBJECT-MATTER 

The  Object  of  a  Contract  must  not  be  Illegal.  —  Another  condi- 
tion is  necessary  to  the  formation  of  a  binding  contract  and  that 
is  that  the  object  of  the  contract  must  not  be  contrary  to  law. 
Certain  things  are  forbidden  by  law,  and  if  these  things  are  in 
the  contemplation  of  the  parties  at  the  time  the  contract  is 
entered  into,  it  is  not  enforceable,  otherwise  the  law  would  be 
aiding  in  an  indirect  way  what  it  expressly  forbids. 

Wells  V.  The  People,  71  111.  532,  was  a  case  in  which  the  school  law  provided 
that  a  teacher  should  have  certain  certificates  of  qualification.  The  school 
directors  employed  plaintiff  to  teach  school  for  six  months  at  $45  per 
month.  He  had  no  certificate,  but  obtained  one  after  he  had  taught  three 
months.  He  then  learned  that  he  could  not  collect  his  pay  as  he  had  not 
qualified,  so  he  canceled  his  contract  with  the  consent  of  the  directors  and 
they  hired  him  under  a  new  contract  for  the  remaining  three  months  at 
$90  per  month.  It  seemed  clear  that  the  intent  was  to  recompense  him  for 
the  time  already  taught.  Held,  that  the  first  contract  was  void  and  by  the 
second  there  was  an  attempt  to  do  indirectly  what  the  directors  could  not  do 
directly,  which  rendered  the  second  contract  void.  But  the  plaintiff  could 
reqover  reasonable  pay  for  his  services  for  the  last  three  months. 

This  principle  applies  only  to  executory  contracts,  for  if  the 
contract  has  been  voluntarily  executed  by  the  parties  it  is  bind- 
ing, as  the  law  will  not  compel  the  return  of  anything  acquired 
under  such  a  contract  any  more  than  it  will  compel  its  perform- 
ance. The  rule  is  that  if  parties  have  voluntarily  completed  a 
contract,  illegal  as  to  the  subject-matter,  the  law  will  leave  them 
where  they  are. 


SUBJECT-MATTER  45 

Illegal  Objects. — The  object  of  the  contract  may  be  illegal 
by  express  statutory  enactment  or  because  of  rules  of  the  com- 
mon law.  The  statutes  declare  some  contracts  illegal  and  void 
and  impose  a  penalty  for  the  making  of  some  others  without 
rendering  the  contracts  void.  A  statute  requiring  a  lawyer  or  a 
physician  to  be  licensed  renders  a  contract  made  without  com- 
pliance with  it  void. 

In  Gardner  v.  Tatiim,  81  Cal.  370,  plaintiff,  a  physician,  was  called  by  de- 
fendant on  March  8,  1883,  and  continued  to  visit  the  patient  until  October  2, 
1883.  Plaintiff's  application  for  a  certificate  to  practice  medicine  was  granted 
March  12  of  the  same  year.  Held,  he  could  not  recover  any  compensation 
for  the  services  rendered  before  the  procuring  of  the  certificate  upon  any 
contract  express  or  implied,  the  contract  being  illegal  and  against  public 
policy. 

In  Buckley  v.  Humason,  50  Minn.  195,  the  plaintiff,  acting  as  a  real  estate 
broker  in  Chicago,  purchased  certain  property  for  defendant.  The  ordinance 
of  Chicago  requires  all  real  estate  brokers  to  be  licensed  and  fixes  the  license 
fee  at  $25,  providing  a  penalty  for  its  violation.  Plaintiff  at  this  time  had  no 
license.  In  an  action  for  his  commissions  it  was  held  that  he  could  recover 
nothing  for  his  services.  Business  transacted  in  violation  of  law  can  not  be 
the  foundation  of  a  valid  contract. 

A  law  requiring  weights  and  measures  to  be  sealed  as  a  con- 
dition precedent  to  a  sale  of  goods  by  a  merchant,  renders  a 
contract  made  in  violation  thereof  void. 

In  Eaton  v.  Kegan,  114  Mass.  433,  a  statute  provided  that  all  oats  and  meal 
should  be  bargained  for  and  sold  by  the  bushel.  Held,  plaintiff  could  not 
recover  the  price  of  the  meal  and  oats  sold  by  the  bag. 

Sometimes  a  statute  simply  imposes  a  penalty  and  does  not 
invalidate  the  contract,  as  seen  in  the  following  case :  — 

Patigborn  v.  IVestlake,  36  Iowa  546,  was  an  action  to  compel  the  payment  of 
a  note  given  in  purchase  of  a  city  lot.  A  statute  existed  that  provided  a  pen- 
alty of  $50  for  selling  any  lot  in  a  town  before  the  plat  thereof  was  recorded. 
The  court  held  that  as  a  general  rule  a  penalty  prescribed  by  statute  for  the 
doing  of  an  act  implies  a  prohibition  which  will  render  the  act  void.  This  is 
not  always  so,  however,  as  the  court  will  look  to  the  language  and  subject- 
matter  of  the  statute  and  the  purpose  soifght  to  be  accomplished,  and  if  from 
this  it  is  manifest  that  it  was  not  the  intent  to  render  the  prohibited  act  void, 
it  will  be  so  construed.     It  was  therefore  held  that  the  note  was  valid. 


46  CONTRACTS 

In  this  country  statutes  against  wagers  or  bets  have  been 
passed  in  most  of  the  states,  and  all  wagers  are  now  practically 
declared  contrary  to  public  policy  and  void. 

In  Love  v.  Harvey,  114  Mass.  80,  plaintiff  made  a  wager  of  $20  with  defend- 
ant that  the  body  of  one  Dr.  Cahill  was  buried  on  a  certain  side  of  the  main 
avenue  in  Holywood  cemetery.  The  stakeholder,  although  forbidden  so  to  do, 
paid  the  $40  left  with  him  to  defendant.  Held,  that  all  wagers  are  unlawful. 
The  party  receiving  the  money  from  the  stakeholder  after  being  forbidden 
to  receive  it  is  liable  to  the  other  for  a  return  of  the  money  even  though  he  be 
the  winner  of  the  wager. 

Statutes  in  many  states  also  prohibit  the  desecration  of  the 
Sabbath  day,  and  any  contracting  done  on  that  day  contrary  to 
the  statutes  is  void. 

Handy  v.  SL  Paul  Globe  Publishing  Co.,  41  Minn.  188,  was  an  action  brought 
for  breach  of  contract.  Plaintiff  was  employed  by  defendant  to  take  charge 
of  the  real  estate  advertising  in  the  daily,  Sunday,  and  weekly  editions  of  de- 
fendant's paper.  A  statute  of  the  state  forbade  any  work  on  Sunday  except 
that  "'  of  necessity  and  charity."  The  court  held  that  issuing  and  publishing 
a  paper  on  Sunday  was  unlawful.  The  contract  was  for  illegal  work  in  part 
and  was  therefore  void. 

Clough  V.  Goggins,  40  Iowa  325,  was  an  action  on  a  promissory  note  made 
on  Sunday.  The  court  held  that  contracts  made  on  Sunday  are  void,  and  a 
promissory  note  made  upon  that  day  will  not  support  an  action. 

In  some  states  it  is  illegal  for  one  to  follow  his  "  ordinary 
calling  "  or  work,  in  others  to  make  any  contracts,  etc.  The 
different  statutes  differ  so  materially  that  no  general  rule  can  be 
laid  down  as  to  what  acts  are  prohibited. 

Aside  from  the  contracts  declared  unlawful  and  void  by  statute 
there  are  contracts  which  are  illegal  at  common  law.  The  courts 
will  not  enforce  an  agreement  to  commit  a  crime  or  to  do  a  civil 
wrong. 

White  v.  Kuntz,  107  N.Y.  518,  held,  that  in  a  composition  of  a  debtor  with 
his  creditors,  any  contract  with  one  of  them  whereby  he  is  to  receive  more 
than  his  pro  rata  share  is  void  and  any  security  given  upon  such  a  promise  is 
void. 

Contracts  against  Public  Policy.  —  All  contracts,  which  if  en- 
forced would  be  contrary  to  the  good  of  the  public  or  opposed 
to  the  welfare  of  the  community,  are  said  to  be  against  public 


SUBJECT-MATTER  .- 

policy  and  therefore  void.  Those  contracts  which  tend  to  injure 
the  government  in  its  relations  with  other  countries,  those  with 
alien  enemies  which  involve  any  communication  over  the  border 
line,  and  those  in  restraint  of  trade,  are  illustrations  of  this  class 
of  contracts. 

In  United  States  v.  Grossntayer,  9  Wall,  (U.S.)  72,  Ernstein,  a  resident 
of  Macon,  Ga.,  was  indebted  to  Grossmayer  of  New  York  when  the  Civil  War 
broke  out.  Through  an  agent  Grossmayer  took  cotton  in  payment  and  had 
it  stored  in  Savannah.  The  government  confiscated  it  and  Grossmayer  made 
claim  against  the  government.  Held,  that  all  intercourse  with  an  enemy  is 
unlawful,  and  notwithstanding  that  the  parties  sustain  the  relation  of  debtor 
and  creditor,  the  plaintiff  above  does  not  present  a  valid  claim. 

All  agreements  looking  to  the  aid  of  hostile  actions  against  a 
friendly  state  are  unlawful  as  being  contrary  to  public  policy. 
A  contract  to  raise  funds  to  aid  an  insurrection  in  a  friendly 
state  would  be  such  an  agreement. 

In  Kennett  v.  Chambers,  14  How.  (U.S.)  38,  a  contract  was  made  in  Cin- 
cinnati, after  Texas  declared  itself  independent  of  Mexico,  but  before  being 
recognized  as  independent  by  the  United  States,  whereby  plaintiff  agreed  to, 
and  did,  furnish  money  to  a  Texas  general  to  enable  him  to  raise  and  equip 
troops  to  fight  against  Mexico.     Held,  such  a  contract  was  void. 

A  contract  to  break  a  law  of  a  sister  state  is  also  against 
public  policy. 

Graves  v.  Johnson,  156  Mass.  211,  was  an  action  for  the  price  of  intoxi- 
cating liquors,  sold  and  delivered  by  plaintiff  in  Massachusetts  to  a  Maine 
hotel  keeper  with  a  view  of  their  being  resold  by  defendant  in  Maine,  contrary 
to  the  laws  of  that  state.  Held,  that  the  contract  had  in  view  the  breaking 
of  the  laws  of  Maine  and  could  not  be  maintained. 

Agreements  to  prevent  or  hinder  the  course  of  justice  are 
illegal ;  as,  to  agree  to  conceal  a  crime  of  which  one  has  knowl- 
edge, to  refrain  for  a  certain  consideration  from  prosecuting  a 
criminal,  to  agree  not  to  testify  as  a  witness,  to  influence  a  wit- 
ness's testimony,  or  to  bribe  a  juror. 

Partridge  v.  Hood,  120  Mass.  403,  held  that  a  contract  to  deed  a  certain 
piece  of  property,  where  the  real  consideration  was  an  agreement  to  drop  a 
criminal  prosecution  against  the  grantor's  son,  was  void  as  against  public 
policy. 


48  CONTRACTS 

A  contract  tending  to  injure  the  public  service  is  contrary  to 
public  policy  and  therefore  void.  Such  a  contract  is  an  agreement 
by  a  public  officer  to  assign  his  salary  to  a  creditor  or  an  under- 
taking to  influence  the  action  of  a  legislature  by  lobbying  or  an 
agreement  to  hinder  or  prevent  competition  for  public  contracts. 

Agreements  which  tend  to  promote  and  encourage  litigation 
are  also  void ;  that  is,  it  is  not  legal  to  speculate  in  lawsuits. 
A  may  have  a  cause  of  action  against  B  but  it  is  not  lawful  for 
C  to  buy  the  action  for  the  purpose  of  instituting  suit.  The 
rule  was  formerly  more  strict  than  now.  The  holding  in  most 
states  at  the  present  time  is  that  an  attorney  can  institute  a  suit 
on  a  "  contingent  fee,"  which  means  that  he  is  to  receive  for  his 
services  a  percentage  of  what  he  recovers.  In  the  earlier  days 
'  this  was  forbidden. 

Agreements  contrary  to  good  morals  are  illegal.  So  also  are 
contracts  which  affect  the  freedom  or  security  of  marriage,  as 
■an  agreement  not  to  marry,  and  contracts  made  in  consideration 
of  the  procuring  or  bringing  about  of  a  marriage,  or  mutual 
agreements  to  obtain  a  divorce. 

Sterling  v.  Sinnickson,  5  NJ.L.  756,  was  an  action  upon  a  written  instru- 
ment promising  to  pay  plaintiff  $1000  provided  he  was  not  married  within  six 
months.     Held,  that  the  contract  was  void  as  against  public  policy. 

In  Cross  v.  Cross,  58  N.H.  373,  plaintiff,  who  was  the  wife  of  defendant, 
received  from  him  certain  notes  secured  by  mortgage  and  in  return  she  deeded 
to  him  the  land  covered  by  the  mortgage.  This  transaction  was  part  of  an 
agreement  between  the  parties  to  separate.  It  was  further  agreed  that  plaintiff 
was  to  obtain  a  divorce  on  certain  grounds  and  defendant  was  to  allow  the 
papers  in  the  action  to  be  served  upon  him  and  make  no  defense,  also  that  the 
children  were  to  be  divided  between  them,  etc.  Held,  that  the  whole  trans- 
action was  illegal  and  void,  and  the  law  would  not  aid  either  party  in  enforcing 
their  unlawful  contract. 

Restraint  of  Trade.  —  There  is  another  class  of  agreements 
known  as  contracts  in  restraint  of  trade  which  are  prohibited 
by  law  as  against  public  policy.  It  is  for  the  good  of  the  com- 
munity and  the  welfare  of  the  individual  that  competition  in 
trade  should  exist  and  that  every  man  should  be  free  to  engage 
in  the  occupation  or  vocation  he  may  prefer.  Still  it  is  but  fair 
that  a  man  in  selling,  out  his  business  shall  include  with  it  the 


SUBJECT-MATTER  .q 

good  will,  and  refrain  from  opening  up  a  like  business  at  the 
next  door  or  on  the  same  street.  The  rule  is,  therefore,  that  if 
the  restraint  imposed  upon  the  one  party  is  not  greater  than  the 
protection  the  other  party  requires,  the  contract  is  valid. 

In  Herreshoffv.  Boutineau,  17  R.I.  3,  plaintiff  hired  defendant  as  a  teacher 
of  languages  for  six  months,  and  defendant  covenanted  not  to  teach  the  Frencii 
and  German  languages  anywhere  within  the  state  of  Rhode  Island  for  one 
year  thereafter.  Held,  that  this  covenant  was  unreasonable  and  void  ;  the 
restriction  extended  beyond  what  was  apparently  necessary  for  the  protection 
of  plaintiff. 

In  National  Benefit  Company  v.  Utiion  Hospital  Company,  45  Minn.  272, 
the  parties  thereto  consisted  of  two  companies  engaged  in  issuing  benefit 
certificates  entitling  the  holders  to  care  and  medical  treatment  in  case  of  sick- 
ness or  injury.  Plaintiff  had  acquired  a  good  business  in  Minnesota,  Wis- 
consin, and  northern  Michigan,  and  entered  into  a  contract  with  defendant 
agreeing  for  a  certain  consideration  to  refrain  for  three  years  from  doing 
business  in  this  territory  except  with  railway  employees.  Held,  that  the 
contract  was  valid  and  not  void  as  being  in  restraint  of  trade.  The  question 
of  the  reasonableness  of  the  restraint  depends  upon  whether  it  is  such  as  to 
afford  a  fair  protection  to  the  party  in  whose  favor  it  is  made. 

From  the  nature  of  the  case  it  will  be  seen  that  a  covenant  to 
refrain  from  engaging  in  the  same  business  within  the  same 
city  might  be  reasonable  in  a  grocery  business,  while  in  another 
business,  the  limitation  of  the  whole  state  would  be  only  just,  as 
in  the  case  of  a  manufacturer  of  heavy  machinery  requiring  a 
wider  territory  for  his  sales. 

In  Perkins  v.  Clay,  54  N.H.  518,  defendant  sold  his  cart  and  butcher  busi- 
ness for  $go  and  agreed  that  he  would  not  carry  on  the  same  business  on  the 
same  route  for  two  years.     Held,  that  this  agreement  was  reasonable  and  valid. 

In  Guerand  v.  Bandelet,  32  Md.  561,  defendant  sold  his  dyeing  and  scour- 
ing establishment,  and  leased  the  premises  to  plaintiff,  entering  into  a  covenant 
,  that  he  would  not  at  any  time  thereafter  engage  in  a  like  business  in  the  city 
of  Baltimore.  Held,  that  this  covenant  was  valid,  as  it  was  not  too  compre- 
hensive in  its  restriction. 

In  Diamond  Match  Co.  v.  Roeber,  106  N.Y.  473,  defendant,  who  was 
engaged  in  the  manufacture  and  sale  of  matches  throughout  the  United  States, 
sold  his  stock  of  machinery  and  good  will  to  plaintiff.  He  covenanted  that 
he  would  not,  at  any  time  within  ninety-nine  years,  engage  in  such  business 
in  any  of  the  states  or  territories  except  Nevada  and  Montana.  Held,  that  the 
covenant  was  valid,  as  the  restraint  was  coextensive  only  with  the  interests 
to  be  protected. 

COM.  LAW  —  4 


50  CONTRACTS 

II.    OPERATION   OF   CONTRACT 

Parties  acquiring  Rights  under  Contracts.  —  We  have  now 
considered  every  element  necessary  for  a  valid  and  binding 
contract,  and  the  question  arises  as  to  the  extent  and  limitation 
of  the  rights  conferred  and  of  the  obligations  incurred. 

As  a  general  principle  we  learn  that  only  the  parties  to  a 
contract  acquire  any  rights  under  it.  It  is  clear  that  it  can  not 
impose  liabilities  upon  any  one  not  a  party  to  it.  A  man  can 
not  voluntarily  and  without  being  asked  to  do  so  pay  another 
man's  debts  and  then  seek  to  establish  himself  as  a  creditor. 
There  is  an  apparent  exception  to  this  rule  in  the  case  of  any 
one  interfering  with  the  contract  of  master  and  servant  and 
inducing  the  servant  to  break  his  contract  of  employment. 
Some  authorities  hold  that  a  party  so  interfering  is  liable  for 
damages,  and  some  hold  that  unjustifiably  to  induce  one  to 
break  any  contract  is  actionable. 

In  Walker  v.  Cronin,  107  Mass.  555,  plaintiff  conducted  a  shoe  fectory  and 
employed  a  large  number  of  people.  The  defendant  with  the  intent  m  injure 
plaintiff's  business  induced  a  number  of  the  employees  to  leave.  The  court 
held  that  plaintiff  could  recover  damages. 

It  is  held  by  some  of  the  courts  that  a  man  can  not  acquire 
rights  under  a  contract  to  which  he  is  not  a  party,  such  as  for  A 
and  B  to  enter  into  a  contract,  the  consideration  being  that 
A  shall  confer  some  benefit  upon  X,  a  third  party.  Does  X 
acquire  the  right  under  such  an  agreement  to  institute  an  action 
against  A  if  the  contract  is  not  executed  .-*  The  English  courts 
say  no.  The  Massachusetts  and  Michigan  courts  hold  with  the 
English  courts  that  no  action  can  be  maintained  by  one  not  a 
party  to  the  agreement  for  whose  benefit  a  promise  is  made. 

In  Linneman  v.  Moross,  98  Mich.  178,  a  father  agreed  with  his  son  that  he 
would  revoke  a  provision  in  his  will  in  favor  of  his  daughter  and  devise  the 
same  property  to  the  son  in  consideration  of  the  son's  paying  the  daughter 
$10  a  month  as  long  as  she  might  live.  The  daughter  was  not  a  party  to  the 
agreement.     Held,  that  she  could  not  enforce  it. 

The  T>Iew  York  courts  in  the  celebrated  case  of  Lawrence  v.  Fox,  20  N.Y. 
268,  held  that  X,  the  third  person,  for  whose  benefit  a  promise  was  made  by  A, 
upon  a  consideration  from  B,  the  promisee,  might  maintain  an  action  upon  the 


OPERATION  OF  CONTRACT  ci 

promise,  provided  that  he  was  the  person  directly  intended  to  be  benefited,  and 
provided  that  B,  the  promisee,  was  at  the  time  under  an  existing  obligation  to 
X,  which  he  sought  to  discharge  by  giving  X  the  benefit  of  As  promise.  The 
facts  in  this  case  were  that  one  Holly,  at  the  request  of  defendant,  loaned  to  de- 
fendant $300.  Holly  stated  at  the  time  that  he  owed  that  sum  to  the  plaintiff" 
and  had  agreed  to  pay  it  to  him  the  next  day.  The  defendant,  in  considera- 
tion of  the  loan,  promised  Holly  that  he  would  pay  the  sum  to  plaintiff  on 
the  next  day.  The  plaintiff  sued  the  defendant  on  this  promise  and  the  court 
held  that  he  could  recover  on  the  promise,  although  he  was  not  a  party  to  it. 

This  rule  as  applied  in  New  York  State  has  been  very  largely 
adopted  throughout  the  United  States. 

In  Dean  v.  Walker,  107  111.  540,  X  sold  certain  real  property  to  defendant, 
the  property  being  mortgaged  to  plaintiff.  As  a  part  of  the  purchase  price 
defendant  agreed  with  X  to  assume  the  mortgage  and  pay  the  amount  named 
therein  to  plaintiff.  Held,  that  plaintiff,  who  was  not  a  party  to  this  agreement, 
could  claim  the  benefits  thereof  and  maintain  an  action  to  recover  the  amount 
of  the  mortgage  from  defendant. 

Assignment  of  Rights.  —  Having  npw  determined  upon  whom 
the  rights  and  liabiUties  fall,  we  must  ascertain  how  and  when 
other  persons  may  take  their  places  and  succeed  to  their  rights, 
if  at  all.  It  is  well  established  that  the  promisor  can  not  assign 
his  liabilities  under  the  contract ;  that  is,  the  promisee  can  not 
be  compelled  to  accept  performance  from  any  but  the  promisor. 
This  is  only  just,  for  if  A  contracts  with  B  to  have  him  do  a  cer- 
tain thing  for  him,  A  is  entitled  to  know  with  whom  he  is  dealing, 
as  he  may  have  taken  into  consideration  B's  particular  adapta- 
bility to  the  work. 

This  rule  is  qualified  in  the  case  of  B  undertaking  to  do  cer- 
tain work  for  A  in  which  no  particular  knowledge  or  skill  is 
required.  He  can  then  have  the  work  done  by  another,  but 
still  B  is  responsible  for  the  work  being  well  done. 

In  LaRue  v.  Groezinger,  84  Cal.  281,  one  H  agreed  to  sell  to  defendant  all 
the  grapes  he  might  raise  in  a  certain  vineyard  during  a  period  of  ten  years, 
and  defendant  agreed  to  pay  therefor  $25  per  ton.  At  the  end  of  five  years 
H  sold  the  vineyard  and  assigned  the  contract  to  plaintiff.  Defendant  refused 
to  accept  grapes  from  plaintiff,  saying  he  had  no  contract  with  him.  Held,  that 
the  contract  could  be  assigned,  as  it  was  not  for  services  of  a  personal  nature. 

The  ice  case  on  page  36  seems  almost  in  conflict  with  this 
decision,  and  in  most  cases  the  holding  seems  to  be  that  the 


52  CONTRACTS 

promisor  can  not  assign  his  liability  unless  the  agreement  con- 
templates that  some  one  else  is  to  do  the  work  or  aid  in  it.  This 
is  true  in  the  case  of  a  contractor  agreeing  to  build  a  house,  as 
it  is  plainly  within  the  contemplation  of  the  parties  that  he  will 
employ  men  to  do  part  or  all  of  the  work. 

As  to  the  rights  of  parties  under  the  contract,  we  find  that  at 
common  law  the  only  way  such  rights  can  be  transferred  to  a 
third  party  is  by  a  new  agreement  between  all  of  the  parties.  The 
equity  courts,  however,  permit  an  assignment  in  many  cases, 
under  which  the  assignee  can  enforce  the  contract,  but  the  party 
liable  must  be  given  notice  of  the  assignment.  In  such  cases 
the  assignee  takes  no  better  title  than  his  assignor  has;  the 
assignment  carries  with  it  all  of  its  defenses.  Rights  under  con- 
tracts are  assignable  by  statute  in  most  of  the  states,  and  the 
assignee  can  enforce  them  in  his  own  name.  The  above  rule 
does  not  apply  to  negotiable  instruments,  which  will  be  treated 
in  another  chapter. 

Aside  from  the  assignment  of  the  rights  under  a  contract  by 
the  voluntary  acts  of  the  parties,  they  may  also  be  transferred 
by  operation  of  law.  In  the  assignment  of  a  lease  of  land,  cer- 
tain covenants  in  the  lease,  which  are  said  to  concern  the  demised 
premises,  pass  to  the  assignee,  such  as  covenants  to  repair,  to 
pay  rent,  etc. 

In  Salisbury  v.  Shirley,  66  Cal.  223,  it  was  held  that  the  person  who  takes 
an  assignment  of  a  lease  is  liable  on  the  covenants  to  pay  rent  and  taxes  the 
same  as  the  original  lessee. 

By  the  death  of  the  person  all  of  his  rights  under  his  con- 
tracts pass  to  his  executor  if  he  leaves  a  will,  or  to  his  adminis- 
trator if  he  dies  without  one.  This  is  not  the  rule  if  the  contract 
depends  upon  his  performing  some  acts  of  personal  service  or 
skill.     In  such  cases  the  contract  dies  with  the  party. 

In  Lacy  v.  Getman,  119  N.Y.  109,  plaintiff  contracted  with  M  to  work  upon 
his  farm  as  an  ordinary  farm  laborer  for  one  year  from  March  i .  In  July  M 
died.     Held,  that  his  death  terminated  the  contract. 

By  the  bankruptcy  of  a  party  all  of  his  property  as  well  as 
his  rights  under  his  contracts  pass  to  the  trustee, 

I 


STATUTE  OF  FRAUDS  53 

12.    STATUTE   OF   FRAUDS 

Outline. —  In  the  year  1676,  a  law  was  passed  in  England, 
entitled  "An  act  for  the  prevention  of  frauds  and  perjuries." 
This  statute  required  that  written  evidence  should  be  supplied 
in  proving  certain  contracts. 

The  statute  commonly  called  "the  fourth  section  of  the 
statute  of  frauds "  provides  as  follows :  "  No  action  shall  be 
brought  whereby  to  charge  any  executor  or  administrator  upon 
any  special  promise  to  answer  damages  out  of  his  own  estate  • 
or  whereby  to  charge  the  defendant  upon  any  special  promise 
to  answer  for  the  debt,  default,  or  miscarriage  of  another  person ; 
or  to  charge  any  person  upon  any  agreement  made  in  consider- 
ation of  marriage ;  or  upon  any  contract  for  sale  of  lands,  tene- 
ments, or  hereditaments  or  any  interest  in  or  concerning  them  ; 
or  upon  any  agreement  that  is  not  to  be  performed  within  the 
space  of  one  year  from  the  making  thereof;  unless  the  agree- 
ment upon  which  such  action  shall  be  brought  or  some  memo- 
randum or  note  thereof,  shall  be  in  writing  and  signed  by  the 
party  to  be  charged  therewith  or  some  person  thereunto  by  him 
lawfully  authorized." 

Object.  — The  object  of  this  statute  was  to  lessen  the  perjury 
in  the  testimony  of  witnesses,  especially  in  the  important  cases 
included  therein,  and  it  therefore  required  that  these  contracts 
be  evidenced  in  writing.  In  nearly  all  of  the  states  of  the  Union 
this  statute  has  been  reenacted  in  somewhat  the  same  form, 
although  the  language  of  the  different  statutes  varies.  This 
statute  does  not  render  oral  contracts  void,  but  says  that  no 
action  shall  be  brought  on  them.  It  takes  away  the  remedy. 
When  action  is  brought  in  court  upon  such  contracts,  it  is  neces- 
sary to  show  the  written  agreement.  The  oral  agreement  is 
valid,  and  after  it  is  made,  a  sufficient  writing  may  be  given. 

Bird  V.  Milnroe,  66  Me.  337,  was  a  case  in  which  a  verbal  contract  was 
made.  The  contract  belonged  to  the  dass  required  by  the  statute  of  frauds  to 
be  in  writing.  It  was  broken,  and  the  parties  after\\-ards  entered  into  a  written 
agreement  containing  the  terms  of  the  oral  contract.  After  the  writing  was 
signed  an  action  was  brought  for  a  breach  of  the  contract  which  occurred 
before  the  written  agreement  was  executed.     Held,  that  the  contract  was  suf- 


54  CONTRACTS 

ficient  to  satisfy  the  statute.    The  writing  was  not  the  contract  itself,  but  the 
evidence  necessary  to  prove  it. 

The  statute  of  frauds  is  a  defense,  solely,  and  the  party  avail- 
ing himself  of  it  must  set  it  up,  otherwise  it  is  waived. 

When  Memorandum  is  Sufficient.  —  The  writing  need  not  be 
a  formal  contract.  A  memorandum  or  note  containing  the 
terms  of  the  agreement,  if  signed  by  the  party  to  be  charged 
or  his  authorized  agent,  is  sufficient. 

Hiirley  v.  Brown,  98  Mass.  545,  was  an  action  to  compel  defendants  to 
perform  their  part  of  the  following  contract  and  to  convey  the  land  to  plaintiff. 
$50  "Lynn,  April  14,  1866. 

"  Received  of  John  and  Michael  Hurley  the  sum  of  fifty  dollars  in  part  pay- 
ment of  a  house  and  lot  of  land  situated  on  Amity  Street,  Lynn,  Mass.  The 
full  amount  is  $1700.  This  bargain  is  to  be  closed  within  ten  days  of  the 
date  hereof."  This  was  signed  by  the  parties.  The  defense  claimed  that  the 
writing  was  not  sufficient,  as  there  were  several  houses  and  lots  on  the  street. 
It  was  shown  that  defendant  owned  no  other  house  and  lot  on  the  same  street. 
The  court  held  that  the  writing  was  sufficient,  and  that  evidence  could  be 
given  as  to  the  particular  house  meant. 

The  memorandum  or  note  required  to  be  in  writing  need 
merely  contain  the  agreement  and  may  consist  of  several  writ- 
ings or  a  number  of  letters  and  memorandums.  It  is  often  the 
case  that  the  terms  are  contained  in  a  series  of  letters  that  have 
passed  between  the  parties  and  which,  considered  together,  con- 
stitute a  writing  suflficient  to  satisfy  the  statute. 

Promise  of  an  Executor  or  Administrator.  —  The  promise  of 
an  executor  or  administrator  to  answer  damages  out  of  his  own 
estate,  that  is,  to  render  him  personally  liable  for  the  debts  of 
the  deceased,  must  be  in  writing.  But  the  writing  does  not 
import  any  consideration,  and  there  must  be  a  consideration  to 
this  as  to  any  contract. 

In  Smithwick  v.  Shepherd,  4  Jones  (N.C.)  196,  Shepherd,  who  owed  plaintiff 
for  board,  died.  Defendant,  his  administrator,  in  a  conversation  with  plaintiff 
stated  that  "he  would  see  it  paid"  or,  "it  should  be  paid."  Held,  that  the 
promise  was  not  enforceable  because  it  was  not  in  writing. 

Promise  to  answer  for  the  Debts  of  Another.  —  In  the  case  of  a 
promise  to  answer  for  the  debt,  default,  or  miscarriage  of  another, 
there  must  be  three  parties;  the  debtor,  the  creditor,  and  the 


STATUTE  OF  FRAUDS  55 

person  who  guarantees  the  debtor's  account.  To  bring  the  case 
under  the  rule  requiring  a  writing  there  must  not  be  an  absolute 
promise  to  pay,  but  a  promise  to  pay  if  the  other  defaults. 

To  illustrate,  A  goes  to  a  grocery  with  B  and  says,  "Give  B 
a  bill  of  groceries,  and  if  he  fails  to  pay  for  them,  I  will."  Such 
a  promise  is  under  the  statute  and  must  be  in  writing,  but  if  A 
says,  "  Give  B  the  bill  of  goods  and  I  will  pay  for  them,"  or, 
"  I  will  see  that  you  are  paid,"  this  is  an  independent  promise, 
making  A  the  principal  debtor,  and  is  not  within  the  statute. 

In  Boston  v.  Farr,  148  Pa.  St.  220,  plaintiff,  a  physician,  brouglit  suit  to 
recover  for  services  rendered  defendant's  stepson.  Defendant  said  to  plaintiff, 
"  Go  and  get  a  surgeon  and  do  all  you  can  for  the  boy  ;  I  will  see  that  you  get 
your  pay."  Held,  the  jury  were  justified  in  finding  that  it  was  an  original 
promise  on  the  part  of  defendant  by  which  he  charged  himself  with  the  bill, 
and  did  not  come  within  the  statute. 

Richardson  v.  Robbitis,  124  Mass.  105,  was  a  case  in  which  B  agreed  to  pay 
a  mortgage  to  plaintiff,  and  the  defendant  agreed  orally  to  pay  the  plaintiff 
such  portions  of  the  mortgage  and  notes  as  B  should  fail  to  pay.  Held,  that 
defendant's  promise  was  within  the  statute  and  should  have  been  in  writing. 

The  test  seems  to  be  whether  the  party  for  whose  debt  the 
promise  is  made  continues  to  be  liable;  if  so,  the  promise  is 
within  the  statutes. 

Agreements  in  Consideration  of  Marriage.  —  The  agreement 
here  meant  is  not  the  promise  to  marry,  but  the  promise  to  settle 
property  or  to  make  a  payment  of  money  in  consideration  of, 
or  conditioned  upon,  a  marriage. 

In  Mc Annuity  v.  Mc Annuity,  120  111.  26,  it  was  held  that  a  verbal  agreement 
made  by  the  woman  before  marriage,  whereby  she  released  and  renounced  all 
interest  in  her  proposed  husband's  estate  after  his  death,  was  void  under  the 
statute  of  frauds. 

Contracts  for  the  Sale  of  Lands  or  Hereditaments,  or  any  Interest 
in  or  Concerning  Them. — This  section  does  not  apply  to  the  deed 
of  conveyance  of  land,  as  that  must  be  written  and  sealed 
without  statutory  requirement.  But  the  statute  here  refers  to 
any  agreement  to  buy  or  sell  land  or  to  any  interest  in  or  con- 
cerning lands,  as  a  grant  of  a  right  of  way  over  one's  land, 
which  is  an  interest  concerning  the  realty  and  within  the  statute. 
Here  a  nice  question  often  arises  as  to  whether  or  not  trees, 


56  CONTRACTS 

crops,  grass,  and  ore  are  real  or  personal  property.  If  the 
former,  all  contracts  concerning  them  are  within  the  statute. 
The  distinction  seems  to  be  that  before  they  are  severed  from 
the  land  the  natural  products,  such  as  trees,  grass,  etc.,  which 
grow  without  cultivation  and  the  labor  of  man  are  parts  of  the 
realty,  and  if  sold  standing,  the  buyer  to  cut  them,  the  contract 
is  within  the  statute. 

Powers  V.  Clarkson,  17  Kan.  218,  held  that  wild  grass  growing  on  unculti- 
vated land  is  a  part  of  the  realty,  and  an  attempted  transfer  of  such  grass  by 
parol  is  void. 

Harrell  v.  Miller,  35  Miss.  700,  held  that  the  term  "land"  embraces  not  only 
the  soil,  but  its  natural  products  growing  upon  and  affixed  to  it.  Therefore  a 
sale  of  growing  timber  is  within  the  statute  of  frauds,  and  void  unless  in  writing. 

But  if  the  owner  of  the  land  is  to  cut  them,  the  sale  is  not 
completed  until  they  are  severed,  therefore  it  is  not  a  sale  of  a 
part  of  the  realty  and  so  not  within  the  statute. 

In  Killmore  v.  Hewlett,  48  N.Y.  569,  defendant,  an  owner  of  some  wood- 
land, entered  into  a  parol  agreement  with  plaintiff  by  which  defendant  agreed 
to  cut  cordwood  and  deliver  the  same  to  plaintiff  at  Syracuse  for  $5  per 
cord.  Defendant  performed  part  of  the  agreement,  and  then  as  the  price  of 
wood  went  up  refused  to  deliver  more,  claiming  the  contract  was  void  under 
the  statute  of  frauds,  as  being  for  the  sale  of  an  interest  in  real  estate.  Held, 
that  as  it  was  a  sale  of  the  trees  when  severed,  and  as  the  plaintiff  was  not  to 
have  any  property  in  the  trees  until  they  were  severed,  the  contract  was  not 
for  a  sale  of  an  interest  in  real  estate,  and  so  not  within  the  statute. 

The  same  rule  applies  to  coal  and  ore. 

Riddle  v.  Brown,  20  Ala.  412,  holds  that  a  contract  granting  the  right  to 
dig  and  carry  away  ore  from  a  mine  is  for  the  sale  of  an  interest  in  real  estate 
and  must  be  in  writing. 

But  if  the  products  are  growing  crops  which  are  harvested 
annually,  and  planted  and  cared  for  by  the  labor  of  man,  the 
general  rule  is  that  they  are  personal  property,  even  when 
attached  to  the  soil. 

Marshall  v.  Ferguson,  23  Cal.  65,  was  an  action  upon  an  oral  contract  for 
the  sale  of  wheat  and  barley  wliicli  was  not  yet  cut.  The  defense  was  that 
since  it  was  an  interest  in  real  estate  tlie  agreement  must  be  in  writing. 
Held,  that  as  it  was  a  sale  of  a  growing  crop,  the  i)rodiict  of  periodical  planting 
and  cultivation,  it  did  not  come  within  the  provisions  of  the  statute,  and  was 
valid  if  made  grally. 


STATUTE  OF  FRAUDS  gy 

Agreements  not  to  be  performed  within  the  Space  of  One  Year.  — 

The  mere  fact  that  the  contract  may  or  may  not  be  completed 
within  one  year  is  not  sufficient  to  bring  it  within  the  statute.  It 
must  be  the  plain  intent  and  purpose  of  the  contract  that  it  is 
not  to  be  performed  within  that  time,  to  bring  it  within  the  statute. 
If  its  performance  depends  upon  a  contingency  that  may  or  may 
not  happen  within  the  year,  no  writing  is  necessary. 

J^mf  V.  K'enf,  62  N.Y.  560,  was  an  action  on  a  contract  whereby  plaintiff 
agreed  to  work  upon  K's  farm  and  to  receive  his  pay  after  K's  death.  Plain- 
tiff entered  upon  such  employment  and  K  died  five  years  thereafter.  Held, 
that  the  contract  of  employment  was  not  within  the  statute,  as  the  time  was 
uncertain,  and  might  have  been  less  than  one  year,  depending  as  it  did  upon 
the  length  of  K's  Hfe. 

Wa/tlv.  Bartmtn,  116  N.Y.  87,  held  that  a  contract  of  partnership  to  con- 
tinue for  three  years  was  void  under  the  statute  of  frauds  unless  in  writing. 

An  agreement  to  support  a  person  during  his  Ufetime  is  not 
within  the  statute  as  he  may  die  within  the  year. 

In  McCormick  v.  Drummett,  9  Neb.  384,  Z,  a  stepfather,  gave  D,  his  step- 
son, the  use  of  his  farm  during  Z's  lifetime  in  consideration  of  D's  supporting 
Z  and  his  wife  during  their  lives.  Held,  that  such  an  agreement  is  not  within 
the  statute. 

But  a  contract  for  a  year's  service  to  be  entered  upon  in  the 
future,  even  the  next  day,  must  be  in  writing  under  the  statute. 

In  Oddy  v.  James,  48  N.Y.  685,  about  the  middle  of  March  the  parties 
thereto  entered  into  a  verbal  agreement  by  which  defendant  employed  plain- 
tiff to  superintend  his  cement  works  for  one  year  from  April  i  next.  Plain- 
tiff worked  until  August  3,  when  defendant  discharged  him.  Plaintiff  sued, 
and  defendant  set  up  that  the  agreement  was  void  under  the  statute  of  frauds. 
Held,  for  the  defendant.  The  contract  was  not  to  be  performed  within  one 
year,  so  must  be  in  writing. 

A  lease  of  land  in  New  York  State  is  expressly  regulated  by 
statute  and  is  an  exception  to  the  above  rule.  A  lease  for  one 
year  or  less  need  not  be  in  writing,  and  this  is  true  although  the 
lease  is  not  to  commence  until  a  future  date.  In  other  states  all 
leases  are  required  by  statute  to  be  in  writing.  By  the  common 
law  it  was  not  required  that  any  lease  be  written,  but  this  was 
changed  in  England  as  well  as  in  the  different  states  by  the 
statute  of  frauds. 


58  CONTRACTS 

13.    SALE  OF  GOODS  ACT 

Conditions.  —  Section  seventeen  of  the  English  statute  of 
frauds  provided :  "  No  contract  for  the  sale  of  goods,  wares,  and 
merchandise,  for  the  price  of  ten  pounds  sterling  or  upwards, 
shall  be  allowed  to  be  good  except  the  buyer  shall  accept  part  of 
the  goods  so  sold,  and  actually  receive  the  same,  or  give  some- 
thing in  earnest  to  bind  the  bargain,  or  in  part  of  payment,  or 
that  some  note  or  memorandum  in  writing  of  the  said  bargain  be 
made  and  signed  by  the  parties  to  be  charged  by  such  contract 
or  their  agents  thereunto  lawfully  authorized." 

This  section  is  reenacted  in  most  of  the  states.  The  amount 
involved  necessary  to  bring  the  contract  within  the  statute  varies 
in  the  different  states.  In  New  York,  Massachusetts,  Connecti- 
cut, Michigan,  Minnesota,  Mississippi,  Indiana,  Nebraska,  Ne- 
vada, and  others,  it  is  $50 ;  in  Maine,  Arkansas,  Missouri,  and 
New  Jersey,  it  is  $30;  in  New  Hampshire,  i^33 ;  in  Vermont, 
$40 ;  in  California  and  Montana,  ^200 ;  in  Utah,  1^300 ;  and  in 
Florida  the  provision  extends  to  all  sales  (see  p.  357).  As  will 
be  seen,  the  statute  includes  most  of  the  articles  regarded  as  per- 
sonal property  under  the  terms,  "goods,  wares,  and  merchandise." 
A  close  question  comes  up  when  the  goods  are  in  process  of  manu- 
facture. If  it  is  held  that  it  is  a  sale  of  labor,  and  of  material 
to  be  made  up,  it  is  not  a  sale  of  goods,  wares,  and  merchandise, 
but  a  contract  for  "work,  labor,  and  services,"  and  does  not 
come  within  the  statute.  In  England  the  test  is  that  if  at  the  I 
time  of  delivery  the  subject-matter  of  the  transaction  is  a  sale  of  ' 
goods,  wares,  and  merchandise,  it  is  within  the  statute,  and  the 
rule  has  been  followed  in  Minnesota,  Missouri,  and  other  states. 

Brown  v.  Sanborn,  21  Minn.  402,  held  that  an  agreement  to  purchase  at 
$5  per  ton  the  flax  straw  to  be  raised  from  45  bushels  of  flaxseed,  it  appear- 
ing that  from  20  to  50  tons  were  raised,  was  within  the  statute  of  frauds  as  a 
contract  for  the  sale  of  goods  and  cb.attels.  The  court  said,  "It  is  essen- 
tially a  contract  for  straw  and  not  for  labor  and  skill  in  producing  the  straw.".. 

In  Burr  ell  v.  Highhyman,  33  Mo.  App.  183,  the  agreement  was  for  three 
pieces  of  furniture,  wliich  were  to  be  finished  up  and  covered  according  to 
defendant's  express  order.    The  consideration  of  the  transaction  was  over  $50. 


SALE  OF  GOODS  ACT  Crt 

Held,  that  when  the  subject-matter  of  a  contract  is  a  chattel  to  be  afterwards 
delivered,  it  is  a  sale  of  goods  and  not  a  contract  for  work,  labor,  and  services, 
although  work  is  to  be  done  on  such  chattel  before  delivery. 

In  New  York.  —  In  New  York  the  rule  is  that  if  the  article  is 
in  existence  at  the  time  of  the  agreement,  it  is  within  the  statute, 
although  some  work  is  to  be  done  upon  it  before  delivery,  but  it 
is  not  within  the  statute  if  the  article  is  not  in  existence  at  the 
time  of  the  formation  of  the  contract,  as  flour  to  be  ground  from 
the  wheat  or  nails  to  be  made  from  the  iron. 

Parsons  v.  Loticks,  48  N.Y.  17,  was  an  action  to  recover  damages  for  a 
breach  of  contract.  It  was  a  parol  contract  that  the  defendants  should  manu- 
facture and  deliver  to  plaintiff  at  New  York  City  ten  tons  of  book  paper  of  a 
certain  quality,  plaintiff  to  pay  thirteen  cents  a  pound  therefor.  Held,  that  the 
contract  was  valid,  and  not  within  the  statute.  The  court  said  the  distinction 
was  between  the  sale  of  goods  in  existence,  at  the  time  of  making  the  contract, 
which  was  within  the  statute,  and  an  agreement  to  manufacture  goods,  which 
was  for  work  and  labor,  and  not  within  the  statute. 

In  Massachusetts.  —  In  Massachusetts  a  still  different  rule  is 
followed,  which  is,  if  the  contract  is  for  articles  in  existence  or 
the  kind  the  vendor  makes  in  the  ordinary  course  of  his  business, 
even  though  not  at  the  time  in  existence,  it  is  within  the  statute  ; 
but  if  the  articles  are  to  be  manufactured  especially  for  the  pur- 
chaser and  not  for  the  general  market,  it  is  not. 

In  Goddard  v.  Binney,  115  Mass.  450,  defendant  went  to  plaintiff's  shop 
and  gave  his  verbal  order  for  a  buggy  to  be  made  for  him  according  to  specific 
directions  and  marked  with  his  monogram.  The  price  was  $675.  After  the 
buggy  was  finished  and  the  bill  had  been  presented  several  times,  plaintiflPs 
shop  burned  and  the  buggy  was  destroyed.  Held,  that  the  contract  was  not 
within  the  statute  applying  to  the  sale  of  goods  and  the  title  to  the  buggy  was 
in  defendant,  as  this  article  was  manufactured  especially  for  the  purchaser  and 
upon  his  special  order  and  not  for  the  general  market.  It  was  not  in  existence 
at  the  time  of  the  contract,  nor  was  it  such  an  article  as  the  plaintiff  in  the 
ordinary  course  of  his  business  manufactured  for  the  general  market. 

One  of  Three  Conditions  Necessary.  —  Of  those  contracts  which 
are  within  the  statutes  the  law  requires  one  of  the  three  following 
conditions  :  that  there  be  a  part  payment  on  account  (to  bind  the 
bargain,  as  is  often  said),  or  a  receipt  and  acceptance  by  the 
buyer  of  at  least  part  of  the  goods,  or,  if  neither  of  the  above 


60  CONTRACTS 

provisions  is  complied  with,  a  wTitten  note  or  memorandum  of 
the  contract  signed  by  the  party  to  be  charged.  This  memoran- 
dum must  contain  all  the  essential  terms  of  the  sale. 

Stone  V.  Browning,  68  N.Y.  598,  held  that  a  writing  simply  acknowledging 
the  purchase  of  goods,  without  stating  the  price  or  terms  of  the  contract  of 
sale,  is  not  a  sufficient  memorandum  of  the  contract  to  satisfy  the  statute 
of  frauds.  All  of  the  essential  parts  of  the  contract  must  be  evidenced  by  the 
writing. 

14.     DISCHARGE  OF  CONTRACT 

Discharge  by  Agreement.  —  As  the  contract  is  created  by  the 
agreement  of  the  parties,  so  the  parties  may,  if  they  choose, 
terminate  and  discharge  it  in  a  like  manner.  This  may  be 
termed  a  waiver  or  rescission  of  the  contract.  If  the  contract 
is  executory,  each  party  may  waive  his  rights  under  it,  and  the 
waiver  of  the  rights  of  one  is  the  consideration  for  the  waiver  of 
the  rights  of  the  other.  It  is  virtually  a  new  contract,  the  sub- 
ject-matter of  which  is  the  waiver  of  the  old  contract,  and  all  of 
the  elements  of  a  contract  are  necessary  to  constitute  a  valid 
waiver.  If  one  party  has  performed  his  part  of  the  contract, 
there  must  be  some  consideration  for  his  release  of  the  other 
party. 

In  Collyer  v.  Moulton,  9  R.I.  90,  Moulton  and  Bromley,  copartners, 
entered  into  a  contract  with  plaintiff  who  agreed  to  build  them  a  wire  bending 
machine.  Moulton  and  Bromley  dissolved  and  Moulton  withdrew  from  the 
firm,  after  which  plaintiff  agreed  to  release  him  from  the  agreement  and  look 
to  Bromley.  Held,  that  this  release  of  Moulton  was  not  binding,  as  it  was 
without  consideration.  If  Bromley  had  agreed  to  pay  plaintiff  the  full  amount 
if  plaintiff  would  release  Moulton,  this  promise  would  have  been  a  valuable 
consideration  for  the  release. 

A  waiver  may  be  effected  by  the  substitution  of  a  new  con- 
tract which  so  changes  the  terms  of  the  old  one  that  it  either 
expressly  or  impliedly  waives  the  old  agreement,  but  the  inten- 
tion to  discharge  the  old  contract  must  be  clear.  The  contract 
may  by  express  terms  provide  for  its  own  discharge,  as,  for 
instance,  a  stipulation  that  one  party  may  terminate  it  upon 
giving  certain  notice  or  performing  certain  conditions. 


DISCHARGE  OF   LONIRACT  C>\ 

Moore  v.  Phoenix  Insurance  Co.,  62  N.H.  240,  was  an  action  on  a  policy  of 
insurance.  The  policy  provided  that  if  the  premises  should  become  vacant 
and  remain  unoccupied  for  a  period  of  more  than  ten  days,  without  the  assent 
of  the  company  indorsed  upon  the  policy,  the  policy  should  become  void. 
The  premises  became  vacant  and  remained  so  for  over  three  months.  They 
were  then  occupied  and  thereafter  burned.  Held,  that  by  the  terms  of  the 
policy  it  was  terminated  and  discharged  by  the  vacancy,  and  subsequent 
occupation  did  not  revive  it. 

Discharge  by  Performance.  —  This  is  the  termination  of  the 
contract  contemplated  by  the  parties  when  it  is  made.  The 
terms  having  been  carried  out  and  the  conditions  performed, 
the  contract  is  satisfied  and  dispharged.  This  of  course  requires 
performance  upon  both  sides.  If  but  one  party  has  performed, 
he  alone  is  discharged  and  not  the  contract,  for  it  remains  in 
force  until  all  of  its  provisions  are  carried  out.  If  the  contract 
is  for  the  sale  of  a  horse  for  $100,  the  contract  is  discharged 
when  the  horse  is  delivered  and  the  money  paid.  If  the  horse 
is  delivered  but  payment  not  made,  it  is  discharged  as  to  the 
seller  but  not  as  to  the  purchaser. 

To  constitute  a  performance  the  terms  of  the  contract  must 
be  carried  out  as  to  time,  place,  and  conditions.  Although  a 
substantial  performance  is  held  good,  the  party  will  be  liable  for 
the  damages  caused  by  his  deviation  from  the  exact  terms  of  the 
contract. 

Nolan  V.  Whitney,  88  N.Y.  648,  was  an  action  to  recover  on  a  contract  for 
building  defendant  a  house.  The  court  found  that  he  had  endeavored  to  live 
up  to  the  agreement  and,  acting  in  good  faith,  had  substantially  performed  his 
part.  He  could  therefore  recover,  notwithstanding  some  slight  defects  in  the 
plastering  for  which  compensation  would  be  made  to  the  defendant. 

Gillespie  Tool  Co.  v.  Wilson,  123  Pa.  St.  19,  was  an  action  to  recover  the 
contract  price  for  drilling  a  gas  well.  The  contract  called  for  a  certain  depth 
and  diameter.  Plaintiff  had  drilled  the  required  depth,  but  the  diameter  of 
part  of  it  was  less  than  the  contract  specified.  The  only  excuse  for  this  was 
the  saving  of  time  and  expense.  Held,  that  this  was  not  a  substantial  com- 
pliance and  he  could  not  recover,  although  the  well  answered  every  purpose 
a  larger  one  would. 

When  the  contract  calls  for  the  payment  of  money,  the  party 
to  whom  it  is  to  be  paid  need  not  accept  a  note  or  check.  But 
if  it  is  accepted,  the  question  arises  as  to  whether  or  not  this 


62  CONTRACTS 

discharges  the  original  contract,  or  whether  the  note  or  check  is 
to  be  regarded  as  a  conditional  payment.  If  it  is  but  a  condi- 
tional payment,  it  does  not  discharge  the  contract  until  it  is  paid. 
It  is  the  intent  of  the  parties  that  governs  here,  but  in  the 
absence  of  any  proof  of  intent  to  the  contrary  the  presumption 
is,  in  most  of  the  states,  that  it  is  taken  conditionally. 

Stone  &*  Gravel  Co.  v.  Gates  Iron  Works,  124  111.  623,  held  that  the  taking 
of  a  note  for  a  preexisting  debt  was  no  payment  unless  the  creditor  expressly 
agreed  to  take  the  note  as  payment  and  to  run  the  risk  of  its  being  paid.  The 
giving  of  a  receipt  for  the  amount  is  not  enough  to  establish  such  a  positive 
agreement. 

In  some  states,  the  courts  hold  exactly  the  contrary  view  as  to 
the  taking  of  notes. 

Dodge  V.  Emerson,  131  Mass.  467,  held,  that  the  giving  and  acceptance  of 
a  promissory  note  for  a  preexisting  debt  is  presumptive  evidence  of  payment. 

A  contract  in  which  the  performance  of  one  party  is  to  be 
satisfactory  to  the  other  gives  rise  to  a  nice  question  and  we  are 
confronted  with  the  inquiry,  can  the  whims  and  personal  taste 
of  the  party  for  whom  the  work  is  done  prevent  the  fulfillment 
of  the  agreement  when  the  performance  is  to  all  intents  and 
purposes  well  accompHshed }  The  answer  seems  to  be  that  if  it 
is  a  matter  of  personal  taste,  as  a  contract  for  painting  a  portrait 
or  a  contract  for  the  sale  of  goods  where  the  parties  can  be  put 
in  statu  quo  {i.e.  the  same  condition  in  which  they  originally 
stood),  the  agreement  will  be  strictly  construed  and  the  buyer 
will  be  the  sole  judge. 

In  Brown  V.  Foster,  113  Mass.  136,  plaintiff  expressly  agreed  to  make  a 
suit  of  clothes  for  defendant  that  would  be  satisfactory  to  him.  The  clothes 
were  made  and  delivered,  but  defendant  declined  to  accept  them.  Plaintiff 
proved  that  they  could  easily  be  altered  and  made  to  fit.  But  the  court  held 
that  under  the  agreement  it  was  for  the  defendant  alone  to  decide  whether  or 
not  he  would  accept  the  clothes.  It  was  the  plaintiff's  fault  if  he  entered  into 
a  contract  that  made  his  compensation  dependent  upon  the  judgment  and 
caprice  of  another. 

But  if  it  is  a  contract  for  work  or  labor  which  does  not  involve 
the  question  of  personal  taste,  as  for  machinery  or  mason  work, 


DISCHARGE  OF  CONTRACT  63 

the  courts  hold  that  the  party  for  whom  the  work  is  performed 
must  be  satisfied  when  in  justice  and  reason  he  ought  to  be 
satisfied. 

In  Hawkins  v.  Graham,  149  Mass.  284,  plaintiff  agreed  with  defendant 
in  writing  to  furnish  and  set  up  a  heating  system  in  defendant's  mill  according 
to  certain  specifications,  and  he  was  to  be  paid  upon  its  satisfactory  completion. 
If  the  system  was  not  satisfactory,  he  wis  to  remove  it  at  his  own  expense. 
Held,  that  the  question  as  to  whether  the  system  was  satisfactory  was  to  be 
determined,  not  by  the  particular  taste  and  liking  of  the  mill  owner,  but  by  the 
judgment  of  a  reasonable  man. 

Legal  Tender.  —  The  payment  of  money  must  be  made  in 
what  is  termed  legal  tender,  unless  the  creditor  consents  to  accept 
something  else.  Legal  tender  is  money  which  Congress  has 
declared  must  be  accepted  if  offered  in  payment  of  debt.  All 
gold  coins  and  silver  dollars  are  legal  tender  for  any  amount. 
Silver  coins  of  denominations  less  than  the  dollar  are  legal 
tender  in  amounts  not  exceeding  ten  dollars.  Minor  coins  such 
as  nickel  and  copper  pieces  are  legal  tender  in  amounts  not 
exceeding  twenty-five  cents.  Gold  and  silver  certificates  are  not 
legal  tender.  United  States  Treasury  notes  are  legal  tender  in 
any  amount.  United  States  notes  or  "greenbacks"  are  legal 
tender  in  any  amount,  except  for  duties  on  imports  and  interest 
on  the  public  debt.  National  bank  notes  are  not  legal  tender, 
but  are  accepted  by  the  United  States  government  for  all  debts 
except  duties  on  imports.  In  actual  practice  the  national  bank 
notes  and  the  gold  and  silver  certificates  are  taken  without 
question  and  pass  as  freely  as  any  other  kind  of  money,  and 
their  acceptance  constitutes  good  payment.  The  receipt  of 
counterfeit  money  does  not  constitute  payment,  and  it  can  be 
returned  within  a  reasonable  time  and  good  money  demanded 
in  its  place. 

Tender.  —  The  creditor  may  refuse  to  accept  the  money  which 
the  debtor  claims  is  due  him.  In  such  a  case  if  the  debtor 
makes  a  sufficient  tender  of  the  amount  he  will  be  relieved  from 
paying  any  costs  in  a  suit  against  him  for  the  debt.  To  consti- 
tute a  sufficient  tender  the  exact  amount  of  money  must  be  pro- 
duced and  offered,  and. the  offer  must  be  made  unconditionally, 


64  CONTRACTS 

that  is,  it  must  be  made  without  any  reservation.  Even  the 
offer  to  pay  upon  condition  that  the  creditor  give  a  receipt  for 
the  money  is  not  a  good  legal  tender.  Unless  the  contract 
provides  a  place  of  payment,  the  tender  must  be  made  to  the 
creditor  personally  if  he  is  within  the  state. 

Impossibility  of  Performance.  —  We  have  seen  on  page  34  that 
when  the  act  to  be  performed  is  an  impossibility  on  the  face  of 
it,  no  contract  exists,  as  such  an  act  is  not  a  valid  consideration. 
But  the  question  comes  up  when  the  impossibility  arises  after 
the  formation  of  the  contract,  and  the  rule  then  is  that  it  does 
not  excuse  performance. 

In  Anderson  v.  May,  50  Minn.  280,  plaintiff  contracted  in  March  to  raise 
and  deliver  to  defendant  591  bushels  of  beans.  Plaintiff  delivered  only  152 
bushels  because  most  of  his  crop  was  destroyed  by  early  and  unusual  frost. 
Held,  that  this  did  not  excuse  his  non-performance.  When  such  causes  may 
intervene  they  should  be  guarded  against  in  the  contract. 

But  if  the  promisor  makes  his  promise  conditional  upon  an 
event,  the  happening  of  which  makes  the  performance  impos- 
sible, this  of  course  excuses  him,  as  where  a  clause  is  inserted 
providing  for  the  contingency  of  fire,  or  strikes,  or  floods.  If 
the  promise  is  made  unconditionally,  the  promisor  takes  all  risk. 

There  are  contingencies  which  may  arise,  however,  which  the 
courts  hold  are  sufficient  excuse  for  not  fulfilling  the  contract. 
Among  these  are  impossibilities  arising  from  a  change  in  the 
law  of  one's  own  country. 

In  Cordes  v.  Miller,  39  Mich.  581,  Miller  leased  from  Cordes,  a  wooden  build- 
ing in  Grand  Rapids,  Mich.,  for  ten  years.  The  lease  contained  this  covenant, 
"If  said  building  burns  down  during  this  lease,  said  Cordes  agrees  to. rebuild 
the  same  in  a  suitable  time,  for  said  Miller."  Miller  occupied  the  premises  for 
two  years,  when  it  was  destroyed  by  fire.  About  the  time  of  the  fire  an  ordi- 
nance was  passed  prohibiting  the  erection  of  wooden  buildings  within  certain 
limits  which  embraced  this  site.  Held,  that  the  covenant  was  released  by  the 
ordinance  making  its  fulfillment  unlawful. 

Another  contingency  which  will  excuse  the  failure  to  fulfill  is 
where  the  continued  existence  of  a  specific  thing  is  necessary  to 
the  performance  of  the  contract.  The  destruction  of  that  thing 
through  no  fault  of  either  party  discharges  the  contract. 


DISCHARGE  OF  CONTRACT 


65 


Waiker  v.  Titcker,  70  111.  527,  was  a  case  in  which  the  lessee  of  a  coal  mine 
covenanted  in  his  lease  to  work  the  same  during  the  continuance  of  his  lease 
in  a  good  and  workmanlike  manner.  The  court  held  he  was  excused  from 
further  performance  when  the  coal  mine  became  exhausted. 

Cleary  v.  Sohier,  120  Mass.  210,  was  a  case  in  which  plaintiff  entered  into 
a  contract  with  the  defendant  to  lath  and  plaster  a  certain  buildin".  After  he 
had  partially  completed  his  part  of  the  contract  the  building  burned.  Held, 
that  the  plaintiff  was  excused  thereby  from  fulfilling  the  remainder  of  his  con- 
tract, and  could  recover  a  reasonable  amount  for  the  work  already  done. 

A  contract  for  the  rendering  of  personal  services  is  discharged 
by  the  death  or  illness  of  the  promisor. 

In  Spalding  v.  Rosa,  71  N.Y.  40,  defendants  contracted  with  plaintiffs, 
who  were  proprietors  of  a  theater,  to  furnish  an  opera  troupe  to  give  a  certain 
number  of  performances.  The  leader  and  chief  attraction  of  the  company 
became  ill  and  unable  to  sing,  and  the  defendants  did  not  appear.  In  an  action 
to  recover  damages  for  the  breach  it  was  held  that  as  the  illness  of  the  chief 
singer  made  it  practically  undesirable  and  impossible  to  appear  without  him, 
and  as  it  was  caused  by  circumstances  beyond  his  control,  it  constituted  a  valid 
excuse  for  non-performance. 

Discharge  by  Operation  of  Law.  —Where  security  of  a  higher 
nature  is  substituted  for  inferior  security  a  merger  of  the  less 
into  the  higher  takes  place.  The  common  illustration  of  this 
rule  is  the  case  of  a  judgment  taken  on  a  simple  contract,  the 
amount  owing  on  the  contract  being  merged  in  the  judgment. 

Another  illustration  is  the  case  of  a  contract  under  seal  made 
by  the  same  parties  and  containing  the  same  subject-matter  as  a 
simple  contract  then  existing.  The  simple  contract  is  merged 
in  the  specialty. 

Clifton  v.  Jackson  Iron  Co.,  74  Mich.  183,  was  a  case  in  which  the  owner 
of  land  on  contracting  for  its  sale,  reserved  the  timber,  with  the  right  of 
removal  for  a  specified  time.  Before  the  expiration  of  this  time  he  conveyed 
the  land  to  the  purchaser  by  warranty  deed  under  seal  without  any  such  reser- 
vation. Held  that  the  contract  became  merged  into  the  deed  and  discharged 
by  it,  and  the  timber  passed  to  the  purchaser. 

Discharge  by  Alteration  of  a  "Written  Instrument. — If  a  written 
instrument  is  altered  or  erased  in  a  material  part  by  a  party  to 
the  contract,  or  by  a  stranger  while  the  instrument  is  in  the 
possession  of  the  party  to  it,  and  with  said  party's  consent  and 
without  the  consent  of  the  other  party  to  the  instrument,  the 
COM.  iJi.yi  —  5 


66  COMTRACTS 

contract  will  be  discharged.  If  the  alteration  is  made  with  an 
intent  to  defraud  there  can  be  no  recovery  on  the  original 
consideration. 

Wood  V.  Steele,  6  Wall.  (U.S.)  80,  was  an  action  on  a  promissory  note 
dated  October  11,  1858,  and  made  by  Steele  and  Newson,  payable  to  their  own 
order  one  year  from  date.  It  was  indorsed  by  them  to  Wood,  the  plaintiff. 
''  September"  had  been  stricken  out  and  " October"  put  in  as  the  date.  The 
change  was  made  after  Steele  had  signed  the  note  as  surety  and  without  his 
knowledge  or  consent.  Held,  that  it  was  a  material  alteration  and  extin- 
guished Steele's  liability. 

But  if  the  alteration  be  made  without  intention  to  defraud, 
there  can  be  a  recovery  on  the  original  contract. 

In  Owen  v.  Hall,  70  Md.  97,  at  the  maturity  of  a  joint  promissory  note  a 
renewal  note  was  given  which  was  invalidated  as  to  one  of  the  makers  on 
account  of  a  material  alteration  made  after  he  signed.  The  alteration  was  the 
insertion  of  the  words  "with  interest"  without  his  knowledge  or  consent. 
Held,  that  a  recovery  could  be  had  against  him  on  the  original  cause  of  action, 
as  there  was  no  fraudulent  intent  in  the  alteration. 

Discharge  by  Bankruptcy In  1867  there  was  enacted  by 

Congress  a  United  States  bankruptcy  law.  This  enactment 
was  repealed  in  1878,  and  from  that  time  down  to  1898  there 
was  no  national  bankruptcy  law,  although  in  several  of  the 
states  bankruptcy  laws  were  enacted.  They  proved  inefficient, 
however,  and  in  1898  a  new  national  bankruptcy  law  went  into 
effect. 

Voluntary  and  Involuntary  Bankruptcy.  —  This  act  provides 
that  "Any  person  owing  debts,  except  a  corporation,  shall  be 
entitled  to  file  a  voluntary  petition  in  bankruptcy." 

"Any  natural  person,  except  a  wage  earner,  or  a  person 
engaged  chiefly  in  farming  or  the  tillage  of  the  soil,  any  unin- 
corporated company,  and  any  corporation  engaged  principally 
in  manufacturing,  trading,  printing,  publishing,  mining,  or  mer- 
cantile pursuits,  owing  debts  to  the  amount  of  one  thousand 
dollars  or  over,  may  be  adjudged  an  involuntary  bankrupt  upon 
default  or  an  impartial  trial,  and  shall  be  subject  to  the  pro- 
visions and  entitled  to  the  benefits  of  this  act.  Private  bankers, 
but  not  national  banks  or  banks  incorporated  under  state  or 
territorial  laws,  may  be  adjudged  involuntary  bankrupts." 


DISCHARGE  OF  CONTRACT  ^y 

Duties  of  Bankrupt.  —  As  soon  as  the  voluntary  petition  is 
filed,  or  after  the  hearing  upon  the  involuntary  petition,  if  allowed, 
the  party  is  a  bankrupt,  and  it  is  then  his  duty  to  attend  the  first 
meeting  of  his  creditors,  if  directed  by  the  court  or  a  judge  of  the 
court,  and  also  the  hearing  upon  the  application  for  his  discharge. 
He  must  also  comply  with  the  lawful  orders  of  the  court;  examine 
the  proofs  of  claims  filed  against  his  estate ;  execute  such  papers 
as  shall  be  ordered  by  the  court ;  execute  to  his  trustee  a  transfer 
of  all  his  property  in  foreign  countries ;  inform  his  trustee  of  any 
attempts  of  his  creditors  to  evade  the  provisions  of  the  bankruptcy 
law,  coming  to  his  knowledge,  or  of  any  attempt  on  the  part  of 
creditors  to  prove  false  claims ;  prepare,  make  oath  to,  and  file 
in  court  within  ten  days,  unless  further  time  is  granted,  after  the 
adjudication,  if  an  involuntary  bankrupt,  and  with  the  petition  if 
a  voluntary  bankrupt,  a  schedule  of  his  property,  showing  the 
amount  and  kind  of  property,  the  location  thereof,  its  money  value 
in  detail,  and  a  list  of  his  creditors,  showing  their  residences,  if 
known  (if  unknown,  that  fact  to  be  stated),  the  amounts  due  each 
of  them,  the  consideration  thereof,  the  security  held  by  them,  if 
any,  and  a  claim  for  such  exemptions  as  he  may  be  entitled  to, 
all  in  triplicate,  one  copy  of  each  for  the  clerk,  one  for  the 
referee,  and  one  for  the  trustee;  and  when  present  at  the  first 
meeting  of  his  creditors  and  at  such  other  times  as  the  court 
shall  order,  submit  to  an  examination  concerning  the  conduct 
of  his  business,  the  cause  of  his  bankruptcy,'  his  dealings  with 
his  creditors  and  other  persons,  the  amount,  kind,  and  where- 
abouts of  his  property,  and,  in  addition,  all  matters  which  may 
affect  the  administration  and  settlement  of  his  estate ;  but  no 
testimony  given  by  him  shall  be  offered  in  evidence  against  him 
in  any  criminal  proceeding. 

The  bankrupt  is  entitled  to  the  same  exemptions  as  are  allowed 
any  debtor  by  the  laws  of  the  state  in  which  he  resides. 

Acts  of  Bankruptcy.  —  Certain  acts  of  a  person  are  called  acts 
of  bankruptcy  and  render  him  Hable  to  be  adjudged  an  involun- 
tary bankrupt  upon  the  petition  of  his  creditors.  The  law  pro- 
vides that  these  acts  of  bankruptcy  by  a  person  "  shall  consist  of 
his  having  conveyed,  transferred,  concealed,  or  removed,  or  per- 


6S  '  CONTRACTS 

mitted  to  be  concealed  or  removed,  part  of  his  property  with  in- 
tent to  hinder,  delay,  or  defraud  his  creditors,  or  any  of  them ;  or 
transferred,  while  insolvent,  any  portion  of  his  property  to  one  or 
more  of  his  creditors  with  intent  to  prefer  such  creditors  over  his 
other  creditors;  or  suffered  or  permitted,  while  insolvent,  any 
creditor  to  obtain  a  preference  through  legal  proceedings,  and  not 
having  at  least  five  days  before  a  sale  or  final  disposition  of  any 
property  affected  by  such  preference  vacated  or  discharged  such 
preference ;  or  made  a  general  assignment  for  the  benefit  of  his 
creditors,  or,  being  insolvent,  applied  for  a  receiver  or  trustee  for 
his  property,  or  because  of  insolvency  a  receiver  or  trustee  has 
been  put  in  charge  of  his  property  under  the  laws  ot  a  state,  or 
a  territory,  or  of  the  United  States;  or  admitted  in  writing  his 
inability  to  pay  his  debts  and  his  willingness  to  be  adjudged  a 
bankrupt  on  that  ground." 

The  petition  can  be  filed  any  time  within  four  months  after 
the  act  of  bankruptcy  has  been  committed. 

Trustee  and  Creditors.  —  As  soon  as  a  person  is  adjudged  a 
bankrupt  a  meeting  of  his  creditors  is  called,  at  which  time  they 
can  examine  the  bankrupt,  elect  a  trustee,  and  do  any  other  busi- 
ness proper  at  the  time.  As  soon  as  the  trustee  is  elected  and 
has  filed  his  bond,  he  becomes  vested  by  operation  of  law  with  the 
title  of  the  bankrupt  to  all  of  his  property  except  that  exempt  by 
law,  to  all  property  transferred  in  fraud  of  creditors  and  to  all 
rights  arising  upon  his  contracts  and  agreements.  It  is  then 
the  duty  of  the  trustee  to  collect  the  assets,  which  he  divides 
among  the  creditors  whose  claims  have  been  accepted. 

Discharge  in  Bankruptcy.  —  The  bankrupt,  after  one  month 
and  within  twelve  months  after  being  so  declared,  may  file  an  ap- 
plication for  a  discharge  in  the  court  of  bankruptcy,  and  the  judge 
shall  grant  the  discharge  unless  at  the  hearing  held  thereon  it 
shall  appear  that  the  bankrupt  has  "committed  an  offense  punish- 
able by  imprisonment  as  herein  provided  ;  or  with  intent  to  con- 
ceal his  financial  condition,  destroyed,  concealed,  or  failed  to  keep 
books  of  account  or  records  from  which  such  condition  might 
be  ascertained  ;  or  obtained  property  on  credit  from  any  person 
upon  a  materially  false  statement  in  writing  made  to  such  person 


DISCHARGE  OF  CONTRACT  5^ 

for  the  purpose  of  obtaining  such  property  on  credit ;  or  at  any 
time  subsequent  to  the  first  day  of  the  four  months  immediately 
preceding  the  fihng  of  the  petition,  transferred,  removed,  de- 
stroyed, or  concealed,  or  permitted  to  be  removed,  destroyed,  or 
concealed,  any  of  his  property  with  intent  to  hinder,  delay,  or  de- 
fraud his  creditors ;  or  in  voluntary  proceedings  been  granted  a 
discharge  in  bankruptcy  within  six  years ;  or  in  the  course  of 
the  proceedings  in  bankruptcy  refused  to  obey  any  lawful  order 
of,  or  to  answer  any  material  question  approved  by,  the  court." 

The  discharge  of  the  bankrupt  acts  as  a  discharge  of  all  of  the 
debts  and  contracts  of  the  bankrupt  at  the  time  of  the  filing  of 
the  petition  except  a  certain  class  of  debts  which  are  tinged  with 
wrong  or  fraud,  or  debts  due  the  government,  or  debts  due 
creditors  who  were  not  duly  notified  of  the  proceedings. 

Discharge  by  Breach.  —  We  have  already  considered  how  a 
contract  may  be  terminated  and  discharged  by  fulfilling  the 
terms  thereof.  We  have  now  to  consider  how  it  may  be  dis- 
charged by  failure  or  refusal  of  one  or  both  of  the  parties  to 
fulfill  the  agreement.  When  the  terms  of  the  agreement  have 
been  broken,  there  arises  in  the  place  of  the  contract  a  new  obli- 
gation under  which  the  party  in  default  is  placed.  That  obliga- 
tion is  to  pay  to  the  other  party  the  damage  arising  therefrom. 
The  injured  party  acquires  a  new  right  through  the  breach  called 
a  right  of  action. 

The  contract  may  be  broken  in  any  one  of  three  ways.  A 
party  may  renounce  his  liabihty  thereunder  or  he  may,  by  his 
own  acts,  make  it  impossible  for  him  to  fulfill,  or  he  may  wholly 
or  partially  fail  to  perform,  what  he  promised. 

Breach  by  Renouncing  Liability.  —  When  one  party  to  the 
contract  renounces  his  Hability  thereunder  before  performance 
is  due  and  declares  that  he  will  not  perform,  a  breach  of  con- 
tract arises  and  the  injured  party  may  at  once  institute  an  action 
for  damages. 

Windmuller  v.  Pope,  107  N.Y.  674,  was  an  action  to  recover  damages  for 
breach  of  contract.  The  parties  entered  into  a  contract  whereby  plaintiff  sold 
to  defendant  1200  tons  of  old  iron  to  be  delivered  at  a  certain  time.  Before 
the  time  expired  defendant  notified  plaintiff  that  he  would  not  receive  nor  pay 


70  CONTRACTS 

for  any  of  the  iron.  Plaintiff  thereupon  sold  the  iron  elsewhere.  Held  that 
the  plaintiff  was  justified  in  treating  the  contract  as  brolcen  at  that  time,  and 
was  entitled  to  bring  action  immediately  without  tendering  delivery  or  waiting 
the  expiration  of  the  time  fixed  for  the  performance. 

If  during  the  course  of  the  performance  one  of  the  parties 
clearly  refuses  to  continue  with  his  part,  the  contract  is  broken, 
and  the  other  party  is  excused  from  further  performance, — in 
fact,  he  must  not  go  on  if  his  continuing  would  increase  the 
damage. 

In  Clark  v.  Marsiglia,  i  Denio  (N.Y.)  317,  defendant  delivered  to  plain- 
tiff a  number  of  pictures  to  be  cleaned  and  repaired.  After  he  had  commenced 
defendant  gave  him  orders  to  stop,  as  he  had  decided  not  to  have  the  work 
done.  Plaintiff,  however,  finished  the  work  and  claimed  the  whole  amount  of 
the  contract.  Held  that  he  had  no  right  to  increase  the  amount  of  damages 
by  going  on  with  the  work.  When  the  contract  was  broken  he  was  entitled 
to  just  compensation  for  the  injury  he  had  sustained  by  the  breach  of  the 
agreement. 

Breach  by  Making  Performance  Impossible.  —  If  one  of  the 
parties  puts  it  out  of  his  power  to  perform  before  the  perform- 
ance is  due,  the  other  party  need  not  wait,  but  may  consider 
the  contract  broken. 

In  Wolf  v.  Marsh,  54  Cal.  228,  Marsh  promised  in  writing  to  pay  Wolf  a 
certain  sum  of  money.  The  note  contained  the  following  condition :  "  This 
note  is  made  with  the  express  understanding  that  if  the  coal  mines  in  the 
Marsh  Ranch  yield  no  profit  to  me  this  note  is  not  to  be  paid  and  the  obli- 
gation herein  expressed  shall  be  null  and  void."  Thereafter  and  before  the 
mines  had  yielded  anything  defendant  sold  them.  Held,  that  the  yielding  of 
profit  by  the  mines  was  a  condition  precedent  to  the  payment  of  the  note,  but 
Marsh  had  rendered  the  happening  of  that  condition  impossible  by  selling  the 
mines,  and  the  obligation  therefore  became  absolute. 

And  this  is  true  if  the  impossibility  is  created  after  the  con- 
tract is  performed  in  part. 

In  Woodberry  v.  Warner,  53  Ark.  488,  Woodberry,  the  owner  of  a  steam- 
boat, employed  Warner,  a  pilot,  at  a  salary  of  $720  per  year  with  the  further 
agreement  that  as  soon  as  the  net  earnings  of  the  boat  should  amount  to  $8000 
he  should  become  the  owner  of  a  one-fourth  interest.  In  about  two  years 
Woodberry  sold  the  boat.  Held,  that  as  he  had  put  it  out  of  his  power  to 
fulfill  the  contract,  he  was  liable  to  Warner  for  the  value  of  his  services  over 
and  above  his  regular  wages. 


DISCHARGE  OF  CONTRACT  7, 

In  order  that  one  party  may  recover  damages  for  a  breach  of 
contract  on  the  part  of  the  other  the  first  party  must  show 
that  the  second  party's  promise  was  not  dependent  upon  the 
acts  of  the  first  party ;  that  is,  if  A  is  to  draw  a  ton  of  coal  for 
B  for  %T,  A  can  not  sue  B  for  payment  until  he  has  performed 
his  own  part. 

In  Weber  v.  Clark,  24  Minn.  354,  defendant  owned  a  farm  of  200  acres 
and  agreed  to  pay  plaintiff  $100  if  he  would  find  a  purchaser  for  it.  Plaintiff 
found  a  man  who  bought  part  of  it,  and  then  sued  for  the  $100.  Held,  that 
he  could  not  recover,  as  he  was  not  entitled  to  the  money  until  he  had  per- 
formed his  part  of  the  contract  and  found  a  purchaser  for  the  whole  farm. 

This  rule  does  not  apply  to  contracts  in  which  the  promises 
are  independent  of  each  other.  Here  a  breach  by  one  does  not 
discharge  the  other. 

Tracy  v.  Albany  Exchange  Co.,  7  N.Y.  472,  was  an  action  for  breach  of 
covenant  in  a  lease  which  provided  that  plaintiff  might  have  the  refusal  of  the 
premises  at  the  expiration  of  the  lease  for  three  years  longer.  When  the  lease 
expired  defendant  refused  to  renew  it  at  the  same  rate,  but  asked  $200  per 
year  more.  Plaintiff  was  somewhat  in  arrears  of  rent  at  the  expiration  of  the 
first  lease.  Held,  that  the  payment  of  the  rent  was  not  a  condition  precedent 
to  the  right  of  the  plaintiff  to  a  renewal  of  the  lease,  the  covenant  to  renew 
and  the  covenant  to  pay  rent  being  independent  promises.  Plaintiff  could 
bring  his  action  for  breach  of  the  contract  to  renew,  although  he  was  guilty  of 
default  in  the  payment  of  his  rent. 

Breach  by  Failure  to  Perform  —  Entire  and  Divisible  Contracts 
—  It  is  clear  that  when  one  party  wholly  fails  in^the  act  that 
was  the  entire  consideration  for  the  second  party's  promise,  and 
that  must  be  done  before  the  second  party  can  be  required  to 
perform  his  part,  the  second  party  will  be  excused.  But  certain 
cases  come  up  in  which  one  party  has  done  part  of  what  he 
promised  or  a  part  of  the  contract  has  been  carried  out,  and  we 
have  to  consider  whether  or  not  the  whole  contract  has  therefore 
failed.  In  other  words,  is  it  an  entire  or  a  divisible  contract .-' 
A  common  illustration  of  the  cases  under  which  this  question 
arises  is  an  agreement  to  deliver  and  pay  for  goods  in  install- 
ments at  different  times. 

The  English  rule,  which  holds  all  contracts  of  this  class  as  divisible,  is  fol- 
lowed in  Myer  v.  Wheeler^  65  Iowa  390,  in  which  plaintiff  sold  to  defendant 


72  CONIRACTS^^ 

ten  car  loads  of  barley,  like  sample,  to  be  delivered  from  time  to  time  on  the 
railroad  tracks  at  Calmar,  Iowa,  and  defendant  was  to  pay  seventy  cents  per 
bushel  for  each  car  load  when  delivered.  After  the  first  car  was  delivered 
defendant  refused  to  allow  more  than  sixty-five  cents,  saying  that  the  barley 
was  not  equal  to  sample,  but  urged  plaintiff  to  ship  balance.  Plaintiff  refused. 
Held,  that  the  contract  was  severable,  and  that  the  refusal  to  pay  for  the  first 
car  load  did  not  entitle  plaintiff  to  rescind  and  refuse  to  deliver  the  other  car 
loads ;  that  plaintiff  could  recover  the  actual  value  of  the  car  delivered,  and 
defendant  could  recover  damages  for  the  failure  to  deliver  the  other  nine  cars. 

But  the  courts  in  this  country  generally  seem  to  hold  the  con- 
trary view,  and  make  the  test  the  real  intent  of  the  parties.-  If  it 
was  intended  to  be  all  one  contract,  the  courts  do  not  make  it 
divisible  because  it  is  to  be  executed  or  carried  out  at  stated 
periods. 

In  Norrington  v.  Wright,  115  U.S.  188,  plaintiff  made  a  contract  of  sale 
to  defendant  of  5000  tons  of  iron  rails  for  shipment  from  a  European  port  at 
the  rate  of  about  1000  tons  per  month,  beginning  in  February,  the  whole  con- 
tract to  be  shipped  before  August.  Plaintiff  shipped  only  400  tons  in  Febru- 
ary and  885  tons  in  March.  As  soon  as  defendant  learned  of  the  failure  of 
plaintiff  to  ship  as  agreed,  he  refused  to  accept  and  pay  for  what  was  shipped, 
and  sought  to  rescind  the  whole  contract  for  the  failure  to  ship  1000  tons  per 
month.  In  this  case  the  contract  was  held  to  be  entire  and  not  divisible,  and 
the  defendant  had  the  right  to  rescind  the  whole  contract. 

Representation  aad  Condition. — Certain  failures  to  perform  are 
not  considered  of  sufficient  importance  to  invalidate  the  contract, 
but  merely  give  rise  to  a  right  of  action  for  the  damages  caused. 
If  one  of  the.terms  of  the  contract  is  but  subsidiary  and  does  not 
defeat  the  main  object  of  the  contract,  a  breach  of  such  term 
does  not  discharge  the  contract.  Such  a  term  is  styled  a  repre- 
sentation and  not  a  condition.  A  statement  descriptive  of  the 
subject-matter  or  of  some  material  incident,  such  as,  the  time  or 
place  of  shipment,  is  generally  regarded  as  a  condition. 

In  Filley  v.  Pope,  115  U.S.  213,  a  contract  provided  for  the  sale  of  iron  to 
be  shipped  from  Glasgow  as  soon  as  possible.  It  was  shipped  from  Leith. 
Held,  that  the  buyer  might  refuse  to  accept.  The  place  of  shipment  was  a 
m  iterial  incident  and  a  warranty  or  condition  precedent,  upon  the  failure  of 
which  the  other  party  might  repudiate  the  whole  contract. 

A  representation  is  a  separate  stipulation  and  neither  suspends 
nor  defeats  the  agreement. 


DAMAGES  y> 


In  Lavts  v.  Meeker,  5  Johns.  (N.Y.)  354,  defendant  sold  plaintiff  a  wagon 
for  $50  and  represented  at  the  time  of  the  sale  that  he  had  been  offered  $50  for 
it  by  different  persons.  The  wagon  was  not  really  worth  over  $25.  Held, 
that  this  was  not  a  warranty  and  constituted  no  grounds  for  an  action. 


15.     DAMAGES 

Nature  and  Extent.  —  As  we  have  already  learned,  the  party 
who  is  guilty  of  a  breach  in  the  performance  of  his  part  of  the 
contract  may  be  compelled  by  the  courts  to  make  good  the  loss 
incurred  by  the  other  party.  If  the  contract  be  discharged  by 
the  breach,  the  party  not  in  default  is  released  from  further  per- 
formance. He  may  also  recover  a  pro  rata  amount  upon  the 
part  performed  if  he  has  done  anything  under  the  contract.  In 
certain  cases  there  is  also  provided  the  extraordinary  relief  of 
an  injunction  or  a  specific  performance. 

If  the  action  brought  by  the  party  not  in  default  is  for  money 
damages,  the  amount  allowed  will  be  the  loss  or  injury  caused 
as  the  natural  result  of  the  breach  or  that  would  ordinarily  be 
v/ithin  the  contemplation  of  the  parties.  The  object  is  to  com- 
pensate the  party  injured  and  not  to  punish  the  party  in  default. 

In  Beeman  v.  Banta,  118  N.Y.  538,  defendant  contracted  to  construct  a 
refrigerator  for  plaintiff  who  was  engaged  in  preparing  poultry  for  market,  and 
v.-ith  a  knowledge  that  plaintiff  intended  to  make  use  of  it  at  once  for  freezing 
and  keeping  chickens  for  the  May  market,  expressly  warranted  that  the  freezer 
would  keep  them  in  ])erfect  condition.  This  it  failed  to  do,  and  as  a  conse- 
quence a  large  number  of  chickens  spoiled.  It  was  held  that  the  plaintiff,  in 
an  action  on  the  warranty,  could  recover  as  damages  the  difference  in  the 
value  of  the  refrigerator  as  constructed  and  its  value  as  it  would  have  been  if 
made  according  to  contract,  and  that  he  could  also  recover  the  market  value 
of  the  chickens  lost,  less  the  cost  of  getting  them  to  market  and  selling  them. 

Specific  Performance  and  Injunction. — The  special  relief  of 
specific  performance  and  injunction  is  granted  only  when  money 
damages  do  not  constitute  an  adequate  remedy,  as  in  a  contract 
calling  for  the  conveyance  of  land.  The  particular  place  could 
not  be  duplicated  elsewhere,  and  it  might  have  a  special  value 
to  the  purchaser  for  which  money  would  but  poorly  compensate 
him.     Specific  performance  would  therefore  be  decreed  at  the 


74  CONTRACTS 

instance  of  the  purchaser  compelling  the  vendor  to  convey,  but 
it  would  not  be  decreed  against  the  purchaser  to  compel  him  to 
accept  the  property  because  there  would  be  an  adequate  remedy 
at  law  in  the  way  of  damages,  as  the  owner  could  sell  to  some 
one  else,  and  the  difference  between  what  the  purchaser  had 
agreed  to  pay  and  what  he  could  get  tor  the  land  after  the 
breach  would  be  the  amount  of  his  damages. 

So  also  the  remedy  by  injunction  is  exercised  only  in  special 
cases  in  which  damages  would  not  afford  adequate  relief  to  the 
injured  party. 

In  Cort  V.  Lassard,  l8  Ore.  221,  plaintiflF,  a  theatrical  manager,  sought  to 
restrain  defendants,  who  were  acrobats,  from  performing  at  a  rival  theater  in 
the  same  place.  Defendants  had  agreed  to  perform  for  plaintiff  exclusively 
for  six  weeks,  and  plaintiff  alleged  that  he  had  prepared  for  them  and  adver- 
tised them  and  that  he  would  lose  large  profit,  as  they  were  unique  attractions. 
Held,  that  when  a  contract  stipulates  for  special,  unique,  or  extraordinary 
personal  services,  involving  special  merit,  skill,  or  knowledge,  so  that  in  case 
of  default  the  same  services  could  not  be  easily  obtained  elsewhere  nor  be 
compensated  for  by  an  action  at  law,  a  court  of  equity  will  be  warranted  in 
applying  its  preventive  remedy  of  injunction. 

16.    DISCHARGE   OF  RIGHT  OF  ACTION 

By  Mutual  Agreement. — As  the  breach  of  a  contract  gives 
rise  to  a  right  of  action  for  the  damages  suffered,  we  have  to 
determine  how  this  right  may  be  discharged,  and  we  find  there 
are  three  means  by  which  it  may  be  effected.  The  parties  may 
discharge  the  right  by  mutual  agreement  if  a  valuable  consid- 
eration be  given,  as  a  payment  in  satisfaction  of  the  damages 
or  an  instrument  under  seal. 

In  Hale  v.  Spaulding,  145  Mass.  482,  defendant  agreed  in  writing  to  pay 
plaintiff  six  sevenths  of  any  loss  he  might  be  subjected  to  as  the  indorser  of 
a  certain  note.  Thereafter  plaintiff  executed  under  seal,  a  receipt  "  in  full 
satisfaction  of  defendant's  liability  on  the  document."  This  discharged  the 
right  of  action  on  the  original  agreement. 

By  Judgment. — The  party  may  prosecute  the  right  of  action 
in  the  courts  and  obtain  a  judgment,  the  right  of  action  being 
then  merged  in  the  judgment. 


DISCHARGE  OF  RIGHT  OF  ACTION  yc 

By  Statute  of  Limitations.— If  the  right  of  action  is  not 
merged  in  a  judgment  or  discharged  by  consent  within  a  given 
time,  the  law  will  refuse  to  enforce  it  by  reason  of  the  lapse  of 
time  under  what  is  termed  the  statute  of  limitations. 

This  statute,  which  was  first  enacted  in  England,  provided  that 
all  actions  upon  account,  and  some  others,  shall  be  commenced 
and  sued  within  six  years.  Like  the  statute  of  frauds  it  has  for 
its  object  the  discouraging  of  litigation  and  the  suppression  of 
perjury,  as  the  lapse  of  time  makes  the  proof  less  certain  and 
the  resurrection  of  old  and  stale  claims  would  be  a  fruitful  field 
for  fraud  and  perjury.  A  provision  analogous  to  the  English 
statute  has  been  enacted  in  all  of  the  states.  In  New  York  and 
most  of  the  other  states  the  period  is  six  years  on  contracts  not 
under  seal  and  twenty  years  on  sealed  instruments  or  judgments 
of  the  court  duly  recorded.  Certain  other  actions  are  barred  in 
three,  two,  and  one  years.     (See  Appendix,  p.  351.) 

The  statutes  in  the  different  states  vary,  and  in  a  number  of 
them  negotiable  instruments  are  not  barred  for  a  longer  time 
than  simple  contracts.  In  the  most  of  the  states  real  property 
actions  are  given  a  longer  period  to  run. 

When  the  Time  under  the  Statute  Begins.  — The  time  begins 
to  run  from  the  day  the  ii^ured  party  would  be  entitled  to  bring 
a  suit  for  the  claim. 

Sturgis  V.  Preston,  134  Mass.  372,  was  an  action  to  recover  money  paid 
under  mistake.  Held,  that  it  was  barred  unless  the  action  was  brought  within 
six  years  from  the  date  of  the  payment  of  the  money,  because  the  right  of 
action  accrued  upon  that  day. 

Most  of  the  statutes  provide  that  the  absence  of  the  defendant 
from  the  state  at  the  time  the  cause  of  action  arises  will  postpone 
the  running  of  the  statute  until  his  return. 

In  Engel  v.  Fischer,  15  Abb.  N.C.  (N.Y.)  72,  it  was  held  that  a  person  who 
comes  within  the  state  with  the  purpose  of  continuing  therein,  concealed  under 
a  fictitious  name  to  avoid  pursuit  by  his  creditors,  is  not  to  be  regarded  as 
having  come  within  the  state  within  the  meaning  of  the  statute  until  the  day 
he  is  discovered. 

If  the  plaintiff  is  under  disability,  such  as  infancy,  insanity,  or 
imprisonment  at  the  time  the  right  of  action  arises,  the  time  will 


^6  CONTRACTS 

be  extended.      But  the  disability  must  exist  at  the  time  the 
statute  begins  to  run  or  it  will  have  no  effect. 

New  Promise. — The  promise  or  right  of  action  may  be  re- 
newed, either  by  a  new  agreement,  which  by  some  of  the  stat- 
utes must  be  in  writing,  or  by  a  payment  on  account.  The 
statute  then  begins  to  run  under  the  new  promise  or  after  the 
new  payment. 

la  Blaskower  v.  Steel,  23  Ore.  106,  plaintiff,  between  the  years  1878  and 
1885,  sold  to  H  a  quantity  of  cigars.  On  May  18,  1885,  there  was  a  credit  on 
the  account.  Held,  that  this  revived  the  whole  account  for  a  further  statutory 
period,  and  the  claim  would  not  outlaw  until  six  years  after  the  payment. 

QUESTIONS   ON    CONTRACTS 

1.  Define  contracts. 

2.  Mention  the  elements  necessary  to  constitute  a  binding  contract. 

3.  Distinguish  between  executed  and  executory  contracts. 

4.  A  agrees  to  give  B  $10  for  delivering  to  him  one  ton  of  hay.  B  delivers 
the  hay,  but  A  has  not  yet  paid  him  for  it.  Is  the  contract  executed  or 
executory  on  A's  part?     On  B's  part? 

5.  What  are  formal  contracts?     Simple  contracts? 

6.  What  is  necessary  to  constitute  a  seal? 

7.  Distinguish  between  oral  and  written  contracts. 

8.  Distinguish  between  express  and  implied  contracts. 

9.  Brown  employs  Whitmore  as  his  agent  to  procure  a  purchaser  for  his 
house  and  lot.  Whitmore,  without  Brown's  knowledge,  purchases  it  himself 
and  takes  title  in  the  name  of  a  third  party.  Is  the  contract  binding  ?  Give 
reason. 

10.  Who  is  an  infant?  In  general,  is  a  contract  made  by  an  infant  valid? 
Is  it  void?  What  are  the  rights  of  the  infant  after  becoming  of  age  in  reference 
to  the  contracts  made  during  his  infancy? 

11.  Carpenter,  an  infant,  traded  with  Smith  a  flock  of  sheep  for  a  horse; 
later,  becoming  tired  of  his  bargain,  he  tendered  back  the  horse  and  demanded 
his  sheep.  At  the  time  of  the  trade  Carpenter  stated  that  he  was  over  twenty- 
one  years  of  age,  when,  in  fact,  he  was  but  eighteen.  Could  he  recover  back 
his  sheep? 

12.  Smith,  becoming  tired  of  the  trade,  tendered  back  the  sheep  and  de- 
manded the  horse,  claiming  his  right  to  disaffirm  the  contract  because  Car- 
nenter  was  not  of  age.     Could  he  recover  his  horse? 

13.  Carpenter,  after  he  becomes  of  age,  is  in  debt  and  his  creditors  seek  to 
recover  the  sheep  on  the  ground  that  the  contract  was  made  during  Carpenter's 
infancy.     Can  they  succeed? 


CONTRACTS 


77 


14.  Edwards,  an  infant,  agrees  with  Larkin  to  purchase  his  automobile. 
After  Edwards  becomes  of  age  and  before  he  has  disaffirmed  the  contract, 
Larkin  sues  him  for  damages  because  of  his  failure  to  take  the  machine.  Was 
the  contract  binding,  or  was  Edwards  bound  to  disaffirm  the  contract  upon 
becoming  of  age  ? 

15.  In  question  1 1,  could  Carpenter  tender  back  the  horse  aod  demand  his 
sheep  before  he  became  of  age? 

16.  In  question  1 1,  though  the  horse  dies  after  Carpenter  received  it,  could 
he  still  disaffirm  the  contract  and  demand  his  sheep  back? 

17.  In  question  11  Carpenter  demands  back  his  sheep,  but  does  not  offer 
to  return  the  horse.  Can  he  get  his  sheep  and  keep  the  horse,  in  case  the 
horse  is  living  and  he  still  has  him  ? 

18.  What  class  of  infants'  contracts  are  void  instead  of  voidable? 

19.  What  class  of  infants'  contracts  are  valid  and  binding? 

20.  One  Stewart  sold  to  Haines,  an  infant,  a  suit  of  clothes,  which  were 
necessaries  and  with  which  he  was  not  properly  provided.  The  suit  was  rea- 
sonably worth  $25.  Stewart  charged  him  $50  for  it.  In  an  action  to  recover 
the  $50,  could  Haines  succeed  ?     If  not,  what  could  he  recover,  if  anything? 

21.  Are  doctor's  services  necessaries?     Are  articles  of  jewelry  necessaries  ? 
.22.    Strong,  an  infant  and  a  son  of  a  laboring  man,  bought  of  plaintiff  a 

gold  watch  worth  $50.  Plaintiff  sought  to  hold  Strong  for  the  price  of  the 
watch,  claimiijg  that  it  was  for  necessaries.     Could  he  recover? 

23.  In  the  above  case,  if  Strong  was  the  son  of  a  bank  president  and  a 
wealthy  man,  would  the  contract  be  for  necessaries? 

24..  In  the  last  case,  if  Strong's  father  had  already  provided  him  with  a  good 
gold  watch  before  he  purchased  the  watch  of  plaintiff,  could  plaintiff  recover  as 
for  necessaries  ? 

25 .  Can  an  insane  person  make  a  valid  contract  ? 

26.  A  contracted  with  B,  an  insane  person,  not  knowing  of  B's  insanity. 
B's  condition  was  such  that  it  was  not  noticeable  at  times  that  he  was  of 
unsound  mind.  Under  their  contract  A  purchased  a  horse  and  wagon  of  B 
and  paid  him  a  fair  price  for  it,  and  afterwards  disposed  of  the  wagon.  Could 
B  repudiate  the  contract? 

27.  In  the  above  case  B  had  been  judicially  declared  insane  by  the  courts. 
Could  B  repudiate  the  contract? 

28.  A  knew  of  B's  insanity.     Could  the  contract  be  set  aside? 

29.  In  question  20,  if  Haines  had  been  a  lunatic  instead  of  an  infant, 
could  Stewart  have  recovered? 

30.  Rogers,  while  intoxicated  to  such  a  degree  that  he  did  not  know  what 
he  was  doing,  sold  his  gold  watch,  worth  $50,  to  Bush  for  $5.  After  be- 
coming sober,  he  tendered  back  the  $5  and  demanded  the  watch.  Could 
he  recover? 

31.  Can  a  married  woman  now  make  a  contract  in  her  own  name?    Could 

she  under  the  common  law  ? 


78  CONTRACTS 

32.  What  is  offer  and  acceptance? 

33.  Baker  offers  to  sell  Holt  his  automobile  for  $600.  Holt  replies,  "  I  will 
accept  your  offer  and  take  the  machine  at  $600,  provided  you  will  accept  $300 
in  cash  and  my  note  at  two  months  for  the  balance."  Is  this  a  valid  contract? 
Give  reason. 

34.  Fitch  has  two  typewriters,  a  Remington  and  a  Smith  Premier.  He  offers 
to  sell  Carey  the  Remington  for  $75.  Carey  writes  back,  telling  him  that  he 
will  pay  him  $75  for  the  Smith  Premier.  Is  this  a  valid  acceptance  of  the 
offer? 

35.  A  murder  having  been  committed  in  the  city  of  Rochester,  the  mayor 
offers  a  reward  of  $1000  for  information  that  will  lead  to  the  apprehension 
and  conviction  of  the  murderer.  O'Laughlin  of  Elmira  gives  such  informa- 
tion, through  which  the  murderer  is  convicted.  At  the  time  he  gives  the 
information  he  has  no  knowledge  that  any  reward  has  been  offered,  but  after 
learning  of  it  claims  the  reward.     Can  he  recover?     Give  reason. 

36.  Smith's  horse  became  frightened  while  being  driven  along  the  canal  and 
went  in.  Jackson,  who  was  driving  near,  saw  him  and  went  to  the  rescue  and 
spent  time  and  labor  in  helping  to  get  the  horse  and  wagon  out.  After  they 
had  succeeded  in  their  efforts  Jackson  claimed  $10  for  his  services.  Cduld  he 
recover? 

37.  When  does  an  offer  become  effectual?  When  does  an  acceptance 
become  binding  ? 

38.  In  what  mode  or  way  must  the  acceptance  be  made? 

39.  Defendant  wrote  plaintiff  on  the  21st  of  June  that  he  would  sell  him 
his  piano  for  $250.  On  the  25th  of  June  plaintiff  deposited  in  the  post  office 
an  acceptance  of  the  offer.  This  letter  in  the  regular  course  of  the  mails 
reached  defendant  at  noon  on  the  day  of  the  26th,  but  about  nine  o'clock  on 
the  morning  of  the  26th  defendant  sold  the  piano  to  another  party  and  sent 
plaintiff  word.  Could  plaintiff  recover  damages  for  breach  of  contract  against 
defendant,  or  was  the  contract  not  yet  completed? 

40.  In  the  above  case  suppose  defendant  sent  the  offer  to  plaintiff  by  a 
messenger.  Plaintiff  instead  of  replying  by  the  messenger  sent  the  letter 
through  the  mail,  but  before  the  letter  reached  defendant  he  had  sold  the 
piano.     Could  plaintiff  recover  for  breach  of  contract? 

41.  Suppose  in  question  39  defendant  about  six  o'clock  in  the  afternoon  of 
the  25th  telegraphed  plaintiff  withdrawing  his  offer.  This  message  was  sent 
a  few  hours  after  plaintiff  had  mailed  his  acceptance  of  the  offer.  Was  the 
acceptance  binding  or  was  the  withdrawal  of  the  acceptance  sent  in  time? 

42.  In  question  40  if  defendant  in  his  offer  had  told  plaintiff  to  reply  by 
mail,  could  plaintiff  recover? 

43.  If  in  question  39  defendant  had  died  on  June  23,  would  plaintiff's  ac- 
ceptance on  the  25th  without  notice  of  his  death  have  been  good? 

44.  Define  consideration.    When  is  consideration  necessary  in  a  contract? 

45.  What  effect  has  a  seal  in  regard  to  consideration? 


CONTRACTS  yg 

46.  Stone  promises  to  give  his  grandson  $100  when  the  grandson  becomes 
of  age.  Stone  does  not  fulfill  his  promise.  Can  the  grandson  compel  him  to 
pay? 

47.  If  in  the  above  case  Stone  had  paid  the  $100,  could  he  recover  it  back? 

48.  One  Powers  promised  Evans  $100  provided  he  would  name  his  child 
after  Powers.  The  child  was  so  named  and  Powers  refused  to  pay.  Could 
Evans  recover? 

49.  Blake  owed  Ayers  $500  which  was  due  July  i.  July  2  Blake  paid 
$400,  and  Ayers  in  consideration  of  getting  the  money  then,  agreed  to 
accept  it  in  iull  payment.  Thereafter  Ayers  sued  for  the  balance  of  $100. 
Could  he  recover? 

50.  In  the  above  case  if  Blake  had  given  $400  and  two  sheep  worth  $5 
each,  could  Ayers  have  recovered  the  remaining  $90? 

51.  In  question  49  if  the  sum  owed  by  Blake  to  Ayers  had  been  in  dispute, 
Ayers  claiming  it  to  be  $500  and  Blake  claiming  it  to  be  $350,  and  they  had 
agreed  upon  a  settlement  of  $400,  which  was  paid  and  accepted  in  full  pay- 
ment, could  Ayers  then  sue  for  the  balance  of  $100  which  he  claims  to  be  due? 
Why? 

52.  Ayers  owes  Blake  $100  which  is  due.  Blake  makes  a  promise  to  extend 
the  time  of  payment  one  year.  Thirty  days  after  Blake  makes  this  promise  to 
extend  the  time  of  payment,  he  sues  Ayers  for  the  amount.  Ayers  claims 
the  account  is  not  yet  due.     Can  Blake  recover? 

53.  In  the  above  case  Ayers  gives  Blake  a  chattel  mortgage  CMi  his  house- 
hold furniture  in  consideration  of  the  extension  of  one  year.  In  that  case  can 
Blake  sue  before  the  year  has  elapsed  ? 

54.  Gibson  rescues  Rogers  from  being  run  over  by  a  railroad  train.  Out 
of  a  spirit  of  thankfulness  Rogers  promises  to  give  Gibson  $100.  Failing  to 
keep  his  promise,  Gibson  sues  him.     Can  he  recover? 

55.  Gilbert  who  is  unable  to  read  or  write  the  English  language  signs  a 
paper  which  is  represented  to  him  to  be  an  agreement  for  a  particular  kind 
of  paint.     It  turns  out  to  be  a  promissory  note  for  $50.     Is  the  note  valid? 

56.  A  contracted  with  B  to  purchase  a  horse  which  stood  in  B's  stable. 
A  thought  he  was  buying  the  bay  horse,  while  B  thought  he  was  selling  a 
brown.    Could  A  recover  damages  for  B's  refusal  to  deliver  the  bay  horse? 

57.  Define  fraud. 

58.  A  sells  B  his  grocery  store  and  stock  of  goods.  B  has  an  opportunity 
of  inspecting  the  store,  and  does  look  through  it.  The  most  of  the  stock  had 
previously  been  injured  by  a  flood  which  filled  A's  cellar.  B  purchases,  and 
later  upon  discovering  this,  sues  A  for  damages.    Can  he  recover? 

59.  In  the  sale  of  goods  where  the  buyer  can  inspect  them,  what  rule  is 
said  to  apply  ? 

60.  What  are  uberrima  fides  contracts? 

61.  Gordon  sells  Brownell  a  horse,  tells  him  that  he  is  the  best  horse  in 
the  neighborhood,  and  that  if  he  keeps  him  until  fall  he  can  sell  him  for  $50 


8o  CONTRACTS 

more  than  he  pays  for  him.     As  a  matter  of  fact  the  horse  is  an  inferior  animal 
and  Brownell  loses  on  his  purchase.     Can  he  recover  damages  from  Gordon  ? 

62.  If  Gordon  had  represented  that  the  horse  was  but  eight  years  old, 
when  in  fact  it  was  twelve,  but  Gordon  believed  it  was  only  eight,  could 
Brownell  have  recovered  damages? 

63.  If  in  the  above  case  when  Gordon  stated  the  horse  was  but  eight  years 
old  he  knew  that  he  was  twelve,  but  made  the  statement  falsely,  still  Brownell 
knew  all  the  time  that  the  horse  was  twelve  years  old  and  was  not  deceived 
by  the  statement,  could  Brownell  recover  damages  of  Gordon.? 

64.  Define  duress. 

65.  A  is  threatened  with  imprisonment  and  physical  injury,  unless  he  signs 
a  note  that  is  presented  to  him.     He  signs  it.     Is  the  note  valid  ? 

66.  If  the  physical  injury  and  imprisonment  had  been  threatened  to  A's 
wife  unless  A  signed  the  note,  would  the  note  have  been  valid? 

67.  If  the  imprisonment  and  violence  had  been  threatened  to  A's  brother 
unless  A  signed  the  note,  would  the  note  have  been  valid  ? 

68.  Is  a  promise  made  by  a  child  to  his  parent  or  a  patient  to  his  physician 
void  ?     Does  it  come  under  a  different  rule  from  an  ordinary  promise? 

69.  A  was  employed  by  B  to  do  an  unlawful  act.  After  A  has  performed 
his  part  of  the  agreement  he  sues  B  for  his  pay.     Can  he  recover? 

70.  If  B  had  paid  A,  could  he  recover  back  the  money? 

71.  A  statute  in  New  York  State  requires  a  physician  to  have  a  certain 
license  before  practicing.  A  physician  practicing  without  such  a  license  sues 
tor  his  services.     Can  he  recover? 

72.  A  makes  a  wager  with  B  that  C  will  be  elected  governor  of  New  York 
State  at  the  coming  election.  C  is  defeated  and  the  money  is  paid  to  B.  A 
brings  an  action  to  recover  the  money  wagered.     Can  he  succeed? 

73.  A,  who  is  an  important  witness  against  B,  a  criminal  on  trial,  is  prom- 
ised $100  by  B  if  he  will  refrain  from  testifying.  He  refuses  to  testify  against 
B,  and  later  sues  B  for  the  $100.     Can  he  recover? 

74.  A  promises  B  $500  provided  he  does  not  marry  in  two  years.  At  the 
end  of  two  years,  B,  having  kept  his  promise,  demands  the  $500.  Can  he 
recover? 

75.  Cross  sold  his  meat  market  to  Sterling  and  agreed  that  he  would  not 
engage  in  the  same  line  of  business  in  the  same  city,  which  had  10,000  inhab- 
itants, for  the  period  often  years.     Was  this  agreement  valid? 

76.  If  in  the  above  case  Cross  had  agreed  not  to  engage  in  the  same  busi- 
ness within  the  state  for  a  period  of  ten  years,  would  the  agreement  have  been 
valid  ? 

"J"].  If  in  question  75  Cross  had  been  engaged  in  manufacturing  automo- 
biles, would  the  restrictions  in  that  case  have  been  valid?  Would  the  restric- 
tions in  question  76  have  been  valid? 

78.  A  and  B  go  into  a  grocery  store  together.  B  is  asked  by  the  grocer 
to  pay  an  account  which  he  owes.     Being  unable  to  pay  it  he  refuses.     A 


CONTRACTS  8 1 

thereupon  without  B's  knowledge  or  request  pays  the  bill  to  save  his  friend's 
credit.     He  then  seeks  to  recover  the  amount  from  B.     Can  he  recover  it? 

79.  Liman  owes  Davis  $500.  Liman  agrees  to  sell  one  Noble  a  team  of 
horses,  provided  he  will  pay  him  $50  in  cash  and  will  pay  Davis  $500  within 
ten  days.  Noble  takes  the  team  and  pays  the  $50  in  cash.  Liman  in  the 
meantime  departs  from  the  country.  Davis  brings  action  against  Noble  for 
the  $500.     Can  he  recover? 

80.  A  undertakes  to  do  certain  work  for  B  in  the  nature  of  some  fine  deco- 
rating and  interior  finishing  in  B's  house.  A  assigns  the  contract  to  C,  who 
seeks  to  go  on  with  the  work.     Can  he  complete  the  work  and  recover  of  B  ? 

81.  What  is  the  statute  of  frauds  and  what  is  its  object? 

82.  A,  who  was  administrator  of  the  estate  of  one  Shepherd,  stated  orally  to 
B,  a  creditor  of  Shepherd's,  that  he  would  see  that  B  was  paid  the  sum  due 
him  ;  if  it  did  not  come  out  of  the  estate  he  would  pay  it  himself.  The  estate 
did  not  pay.     Could  the  promise  be  enforced? 

83.  If  in  the  above  case  Shepherd  was  still  living  and  A  was  a  friend  of 
his,  could  B  collect  on  A's  promise  ? 

84.  Clarkson  agrees  to  sell  Miller  all  of  the  grass  growing  on  his  farm  for 
the  coming  season.     The  contract  is  not  in  writing.     Can  it  be  enforced? 

85.  If  the  contract  had  been  to  sell  all  of  the  pine  lumber  to  be.  cut  on  his 
farm  by  the  purchaser,  could  the  contract  have  been  enforced? 

86.  If  the  contract  had  been  to  sell  the  wheat  growing  on  his  farm,  could 
an  oral  contract  have  been  enforced  ? 

87.  If  Clarkson  was  to  have  cut  the  grass  and  timber  himself  and  to  have 
delivered  it  to  Miller,  could  the  contract  have  been  enforced? 

88.  A  employs  B  to  work  for  him  for  the  period  of  one  year  from  the 
coming  March.     Must  this  contract  be  in  writing  to  be  valid  ? 

89.  If  the  agreement  had  been  to  work  for  B  during  the  life  of  A,  would 
the  oral  contract  have  been  valid? 

90.  In  February,  A  leases  his  farm  to  B  for  one  year  from  the  following 
March.     Must  this  lease  be  in  writing  to  be  valid  in  New  York  State? 

91.  Under  the  sale  of  goods  act,  if  the  sale  amounts  to  the  sum  specified 
therein  or  over,  in  what  three  ways  may  the  contract  be  rendered  valid? 

92.  Burrow  goes  to  Sanburn's  wagon  factory  and  orders  a  wagon  made 
according  to  his  special  design,  with  his  coat-of-arms  on  the  sides  and  fin- 
ished up  in  some  particular  way.  The  price  for  the  wagon  is  to  be  $200.  When 
it  is  nearly  completed,  but  before  it  is  delivered,  the  factory  burns.  Under 
the  New  York  rule,  who  loses? 

93.  Under  the  Massachusetts  rule,  who  loses? 
94    Under  the  English  rule,  who  loses  ? 

95.  If  in  the  above  case  the  order  had  been  for  a  wagon  of  the  style  and 
kind  regularly  manufactured  by  this  party,  who  would  lose  under  the  New 
York  rule?     Under  the  Massachusetts  rule?     Under  the  English  rule? 

96.  What  is  necessary  to  discharge  a  contract  by  performance? 

COM.  LAW  —  6 


82  CONTRACTS 

97.  A  owes  B  $100.  He  tenders  him  a  check  for  $100  in  payment  of  the 
debt.     Must  B  accept  it  ? 

98.  In  the  above  case,  if  B  does  accept,  does  it  discharge  the  original 
contract  ? 

99.  Emerson  enters  into  a  contract  with  Foster  who  agrees  to  build  him 
an  engine  and  boiler  for  his  flour  mill.  The  contract  is  that  the  engine  and 
boiler  shall  be  constructed  and  installed  in  complete  running  order  to  the 
entire  satisfaction  of  Kmerson.  Foster  does  the  work,  and  the  plant  seems  to 
run  satisfactorily ;  but  Emerson  is  not  satisfied,  says  he  does  not  want  it,  and 
orders  Foster  to  take  it  out.  Expert  machinists  claim  that  the  work  is  done 
in  a  satisfactory  manner.  Must  Emerson  accept  it,  or  has  he  the  right  to 
reject  it  under  the  agreement  ? 

100.  A  orders  a  suit  of  clothes  of  B,  his  tailor,  and  specifies  that  he  will 
not  take  them  unless  they  are  satisfactory  to  him,  he  being  the  sole  judge. 
The  suit,  as  far  as  any  third  party  could  determine,  is  a  good  fit ;  but  A  says 
he  does  not  want  it,  it  is  not  satisfactory  to  him.  Can  he  refuse  to  accept  the 
suit  ? 

loi.  A  agrees  with  B  to  manufacture  and  deliver  1000  pairs  of  shoes  in 
90  days,  but  because  of  a  strike  in  A's  factory  he  is  unable  to  fulfill  his  agree- 
ment. Is  the  strike  which  renders  the  performance  of  the  contract  practically 
impossible  an  excuse  for  his  non-performance  ? 

102.  If  in  the  above  case  A's  agreement  to  furnish  the  shoes  to  B  had 
stipulated  that  the  contract  was  subject  to  strikes,  etc.,  would  he  have  been 
liable  for  non-performance  ? 

103.  A  employs  B  to  paint  his  house.  When  the  work  is  partially  done 
the  house  burns.  Does  this  excuse  B's  non-performance  of  his  contract,  and 
can  B  recover  a  portion  of  his  pay  ? 

104.  What  do  we  mean  when  we  speak  of  the  merger  of  one  contract  into 
another  ? 

105.  Hall  gives  Wood  his  promissory  note,  payable  one  month  after  date. 
Wood  changes  the  note,  making  it  payable  twenty  days  after  date.  What 
effect  has  this  upon  the  instrument  ? 

106.  If  the  alteration  was  made  without  any  intention  to  defraud,  could 
Wood  recover  on  the  original  contract  ? 

107.  Who  may  file  a  voluntary  petition  in  bankruptcy  ? 

108.  Who  may  be  adjudged  an  involuntary  bankrupt  ? 

109.  What  are  the  duties  of  a  bankrupt  after  he  has  been  adjudged  such  ? 

I  ID.   When  may  a  bankrupt  file  a  petition  for  his  discharge  from  his  debts  ? 

111.  Edwards  sues  Adams  on  a  note  given  for  $100.  Adams  sets  up  the 
defense  that  one  year  after  giving  the  note,  and  before  the  commencement  of 
the  action,  he  filed  a  petition  in  bankruptcy  and  received  his  discharge.  Is  the 
defense  good  i 

112.  A  employs  B  to  deliver  100  loads  of  stone  for  him  within  30  days, 
foi  $100.    After  he  has  delivered  10  loads,  B,  within  3  days  after  the  agree- 


CONTRACTS  83 

ment  is  made,  throws  up  the  contract  and  says  that  he  will  not  perform  any- 
further.  What  remedy  has  A  ?  May  he  proceed  at  once  with  his  remedy,  or 
must  he  wait  until  the  30  days  have  expired  ? 

ir3.  In  the  above  case,  B,  after  delivering  5  loads,  refused  to  perform  fur- 
ther until  he  received  his  pay  for  the  whole  contract.     Had  he  the  right  ? 

114.  For  breach  of  the  contract  to  deliver  the  stone,  what  would  be  the 
damages  that  would  be  allowed  for  the  injury  ?  That  is,  by  what  rule 
would  they  be  measured  ? 

115.  When  is  the  special  remedy  of  a  specific  performance  granted  ? 

116.  When  a  right  of  action  for  damages  is  sued  in  the  courts  and  placed 
in  judgment,  what  do  we  say  becomes  of  this  right  ? 

117.  Define  the  statute  of  limitations.     What  is  its  object  ? 

118.  When  does  the  period  under  the  statute  of  limitations  begin  to  run  ? 

119.  Does  the  fact  that  the  plaintiff  is  an  infant  or  an  insane  person  at  the 
time  the  right  of  action  arises  affect  the  running  of  the  statute  of  limitations  ? 


SALES  OF  PERSONAL  PROPERTY 

I.     IN   GENERAL 

Sale  and  Barter.  —  A  sale  is  a  contract  between  parties  to 
give,  and  to  pass,  rights  of  property  for  money  which  the  buyer 
pays  or  promises  to  pay  to  the  seller  for  the  thing  bought.  As 
stated  in  this  definition  a  sale  is  a  contract  and  subject  to  all  of 
the  requirements  of  a  valid  contract.  The  parties  must  be  com- 
petent to  enter  into  a  binding  contract.  There  must  be  mutual 
assent  and  there  must  be  a  consideration.  If  there  is  an 
absence  of  consideration,  the  transfer  is  a  gift.  The  price  or 
consideration  must  be  paid  or  promised  in  money.  This  distin- 
guishes sale  from  barter,  which  is  the  exchange  of  one  article 
of  personal  property  for  another. 

In  Commonwealth  v.  Packard,  5  Gray  (Mass.)  loi,  defendant  was  tried 
for  the  unlawful  sale  of  intoxicating  liquor.  It  was  proved  by  a  witness  that 
he  called  for  intoxicating  liquor  at  defendant's  hotel,  that  a  waiter  by  defend- 
ant's order  gave  it  to  him  and  that  he  offered  to  pay,  but  the  defendant  would 
not  take  anything.  Held,  that  it  was  not  a  sale  but  a  mere  gratuity  or  gift, 
and  the  defendant  was  discharged. 

As  a  general  thing  the  same  rules  apply  to  a  barter  as  to  a 
sale,  and  we  can  consider  that  the  law  applicable  to  a  case  of 
barter  is  practically  the  same  as  that  explained  in  this  chapter 
on  sales.  It  seems,  however,  that  the  power  or  authority  vested 
in  an  agent  to  sell  does  not  give  authority  to  barter. 

In  Edwards  v.  Cottrell,  43  Iowa  194,  it  was  held  that  the  mortgage  of  a  chat- 
tel, with  power  of  sale  by  the  mortgagee  upon  default  in  payment,  confers 
upon  him  no  right  to  barter  the  mortgaged  property  or  to  dispose  of  it  other- 
wise than  for  cash. 

Transfer  of  the  Right  of  Property.  —  There  must  be  a  transfer 
of  the  right  of  property,  that  is,  a  transfer  of  the  absolute  prop- 

S4 


IN  GENERAL 


85 


erty  in  the  thing  sold,  in  order  to  constitute  a  sale.  This  "abso- 
lute property  "  is  a  term  used  to  distinguish  it  from  a  special 
property,  or  right  in  personal  property.  For  instance,  when 
property  is  pledged,  the  special  property  passes  to  the  pledgee 
and  the  general  title  remains  in  the  owner.  The  transfer  of  a 
special  property  in  a  chattel  constitutes  bailment  and  will  be 
'  considered  in  another  chapter. 

Sale  and  Bailment.  —  The  rule  is  that  if  the  identical  thing 
is  to  be  returned,  even  though  in  a  different  form,  as  wheat 
ground  into  flour,  it  is  a  bailment ;  but  if  the  identical  thing 
is  not  to  be  returned,  the  general  rule  is  that  it  is  a  barter 
or  a  sale. 

In  Hyde  v.  Cookson,  21  Barb.  (N.Y.)  92,  plaintiff  and  one  Osborn  entered 
into  an  agreement  whereby  plaintiff  furnished  certain  hides  to  Osborn  who 
took  them  to  his  tannery  and  manufactured  them  into  sole  leather,  and  was  to 
return  them  to  plaintiff  in  New  York.  Plaintiff  was  then  to  sell  them  at  his 
discretion,  and  when  sold  the  net  proceeds  less  costs,  commissions  of  plaintiff, 
expenses,  etc.,  were  to  go  to  Osborn  for  tanning.  If  there  was  any  loss, 
Osborn  was  to  stand  it.  Osborn  failed  before  the  contract  was  completed 
and  assigned  to  defendant.  Defendant  refused  to  deliver  the  hides  to  plain- 
tiff, claiming  it  was  a  sale  and  the  title  was  in  Osborn.  Held,  that  it  was  not 
a  contract  of  sale  but  a  bailment,  the  right  of  property  remaining  unchanged, 
and  plaintiff  was  entitled  to  the  hides. 

It  is  held  that  the  delivery  of  logs  to  be  sawed  into  boards  is 
not  a  sale  but  a  bailment.  The  importance  of  the  distinction  is 
realized  when  we  perceive  that  if  it  is  a  bailment  the  title  does 
not  pass  from  the  original  owner  by  the  delivery,  but  if  the 
transaction  constitutes  a  sale,  the  title  passes.  The  question 
often  arises  when  the  stock  or  material  delivered  is  destroyed 
by  fire,  or  otherwise,  and  it  is  required  to  be  determined  upon 
whom  the  loss  shall  fall.  An  exception  to  the  rule  is  the  case 
of  a  warehouseman  who  receives  grain  and  mixes  it  with  like 
grain  in  the  same  storage.  Here  there  is  evidently  no  inten- 
tion to  return  the  identical  grain,  but  some  of  the  same  kind ; 
still  some  cases  hold  that  this  transaction  is  one  of  bailment 
in  which  title  does  not  pass,  but  others  follow  the  general 
rule  and  hold  it  a  sale  under  which  the  title  passes  to  the 
warehouseman. 


86  SALES  OF  PERSONAL  PROPERTY 

2.     FIXTURES 

Personal  and  Real  Property.  —  In  treating  of  the  law  applica- 
ble to  the  sale  of  personal  property  it  is  necessary  for  us  to 
distinguish  between  personal  and  real  property.  We  under- 
stand in  a  general  way  that  real  property  is  land  and  rights 
issuing  out  of  and  concerning  it.  As  distinguished  from  this, 
we  learn  that  personal  property  is  property  of  a  personal  or 
removable  nature,  and  includes  all  property  rights  not  included 
in  the  classification  of  real  property.  Personal  property  is  also 
called  chattels.  We  often  find  much  difficulty  in  distinguishing 
between  the  two  classes  of  property.  It  is  plain  that  a  house 
and  lot  or  a  farm  is  real  property,  and  it  is  equally  apparent 
that  a  horse  and  wagon  or  a  suit  of  clothes  is  personal  property. 

But  the  standing  of  certain  articles  known  as  fixtures  is  less 
clearly  defined.  By  the  early  English  law  any  interest  in  land 
less  than  the  absolute  title  or  freehold  was  called  personal 
property,  but  in  the  United  States  this  is  not  the  rule.  The 
only  interest  in  land  that  can  be  classed  as  personal  property  at 
the  present  time  is  the  lease. 

In  Taylor  v.  Taylor,  47  Md.  295,  A  at  the  time  of  his  death  left  a  will  giving 
his  real  estate  to  a  certain  party  and  his  personal  estate  to  his  son  absolutely. 
A  owned  a  number  of  leases  of  property,  some  of  which  were  to  run  for  ninety- 
nine  years.     Held  that  these  leases  passed  as  personal  property  to  the  son. 

Fixtures  are  Chattels.  —  In  regard  to  fixtures,  we  learn  that 
they  are  chattels,  either  actually  or  constructively  affixed  to  the 
land.  In  some  cases  they  can  not  be  removed  and  are  consid- 
ered part  of  and  pass  with  the  land,  while  under  other  conditions 
they  may  be  separated  from  the  realty  and  do  not  pass  with  it. 
The  early  common  law  was  most  favorable  to  the  landowner, 
regarding  anything  attached  to  the  realty  as  his  property,  but 
the  rule  was  relaxed,  at  first  in  favor  of  the  tenant  who  erected 
fixtures  for  use  in  his  trade  or  business,  which  were  held  to  be 
removable.  Now,  however,  the  question  arises  not  only  between 
landlord  and  tenant,  but  also  between  mortgagor  and  mortgagee, 
and  vendor  and  vendee.     A  person  selling  his  farm  must  know 


FIXTURES 


87 


what  he  can  remove  and  what  he  has  sold  with  the  land.  The 
tenant  must  determine  what  he  can  take  with  him  and  what 
passes  to  the  landlord  because  of  its  attachment  to  the  realty. 
Different  rules  have  been  laid  down  by  different  courts. 

One  of  the  tests  often  applied  is  the  intention  of  the  party 
annexing  the  chattel  to  the  land.  This  intention  is  inferred 
from  the  nature  of  the  article  affixed,  the  relation  of  the  party 
making  the  annexation  with  the  owner  of  the  land,  the  struc- 
ture and  mode  of  the  annexation  and  the  purpose  for  which  it  is 
to  be  used. 

In  Hinkley  v.  Black,  70  Me.  473,  plaintiffs  entered  into  possession  of  a  tract 
of  land  under  a  contract  for  its  purchase,  and  erected  large  and  substantial  build- 
ings with  engines  and  machinery  for  manufacturing  an  extract  of  bark  for  tan- 
ning purposes.  Plaintiifs  failed  to  pay  for  the  land,  so  never  acquired  title. 
In  an  action  to  recover  the  machinery  and  engines  it  was  held  that  they  were 
a  part  of  the  realty,  and  could  not  be  sold  as  personal  property  as  against  the 
owners  of  the  land. 

In  Ottumwa  Woolen  Mill  Co.  v.  Hawley,  44  Iowa  57,  it  was  held  that  the 
machinery  of  a  woolen  mill,  consisting  of  looms,  carders,  breakers,  condensers, 
etc.,  were  part  of  the  realty.  The  looms  were  fastened  to  the  floor  by  screws, 
and  the  carders  were  kept  in  position  by  their  own  weight,  one  weighing 
3000  pounds.  The  spinning  jacks  were  fastened  by  cleats  nailed  to  the  floor. 
The  question  in  this  case  arose  between  the  purchaser  under  a  mortgage  and 
the  owner.  The  court  said  that  of  the  three  requisites  generally  considered 
necessary  to  constitute  a  chattel  a  part  of  the  realty,  the  first,  that  of  physical 
attachment,  is  very  uncertain,  and  the  only  value  to  be  attached  to  it  is  in 
determining  the  intention  of  the  owner  in  making  the  annexation.  The  sec- 
ond, being  application  to  the  use  or  purpose  to  which  that  part  of  the  realty 
with  which  it  is  connected  is  appropriated,  is  met  in  this  case  by  the  use  of  the 
machinery  in  the  mill.  The  third  requisite,  being  the  intention  of  the  party 
making  the  annexation,  was  held  by  the  court  to  be  the  controlling  consider- 
ation in  determining  the  whole  question. 

It  seems  that  there  are  other  tests  that  have  to  be  applied  in 
connection  with  the  intent,  to  determine  whether  or  not  the 
chattel  is  a  part  of  the  realty.  One  is  the  mode  and  degree  of 
the  annexation.  That  is,  if  the  chattel  is  so  firmly  and  securely 
affixed  to,  and  incorporated  into,  the  building  that  it  can  not  be 
removed  without  injury  to  itself  and  the  building  it  is  generally 
not  removable.  Under  the  common  law  the  mode  and  degree 
of  annexation  was  practically  the  controlling  (question. 


88  SALES  OF  PERSONAL  PROPERTY 

Murdoch  V.  Gifford,  i8  N.Y.  28,  holds  a  rule  contrary  to  that  in  the  case 
of  the  Othimiva  Woolen  Mill  Co.  v.  Hawley,  as  in  this  case  it  was  held 
that  looms  in  a  woolen  factory,  connected  with  the  motive  power  by  leather 
bands  and  so  attached  to  the  building  by  screws  holding  them  to  the  floor 
that  they  could  be  removed  without  injury  to  themselves  or  the  building  are 
chattels.    The  question  arose  between  the  mortgagor  and  mortgagee. 

In  Despatch  v.  Bellamy,  12  N.H.  205,  it  was  held  that  an  engine  used  in  a 
building  and  so  placed  that  it  can  not  be  removed  without  taking  down  part  of 
the  building  is  a  fixture  ;  while  loose,  removable  machinery  not  attached  to  the 
building  is  not  regarded  as  part  of  the  real  estate.  The  engine  in  this  case 
could  not  be  removed  without  taking  the  boards  off  the  side  of  the  building, 
and  the  boilers  were  set  in  brick,  requiring  the  wall  to  be  torn  down  to  remove 
them.     In  this  case  the  question  arose  between  the  grantor  and  the  purchaser. 

A  person  may  not  intend  to  make  a  permanent  improvement, 
but  the  chattel  may  be  so  firmly  annexed  that  the  law  will  not 
permit  him  to  carry  out  his  intention  of  removing  it.  In  such 
a  case  the  damage  to  the  realty  must  be  very  pronounced  to 
constitute  the  chattel  a  part  of  the  real  property  if  it  is  the 
expressed  intent  of  the  party  that  the  chattel  shall  remain 
personalty. 

Hendy  v.  Dinkerhoff,  57  Cal.  3,  was  an  action  to  recover  possession  of  a 
steam  engine  and  boiler.  One  Lampson  was  in  possession  of  land  under  a 
contract  to  purchase  from  defendant,  the  contract  providing  that  in  case  of 
failure  to  purchase,  all  tools  shouW  belong  to  defendant.  Plaintiff  later 
leased  an  engine  and  boiler  to  Lampson  and  the  agreement  was  that  if 
Lampson  failed  to  pay,  plaintiff  might  retake  them.  The  engine  was 
built  into  the  mnsonry  so  that  it  could  not  be  removed  without  destroying  the 
masonry  and  the  wall  to  which  it  was  affixed,  but  it  was  held  that  even  as 
against  the  defendant,  the  owner  of  the  land,  the  chattel  remained  the  property 
of  the  plaintiff. 

But,  on  the  other  hand,  the  fact  that  it  may  be  removed  with- 
out such  injury  does  not  necessarily  make  it  personalty. 

Goodrich  v.  Jones,  2  Hill  (N.Y.)  142,  held  that  fencing  material  that  has 
been  used  as  part  of  the  fences  on  a  farm,  but  is  temporarily  detached  without 
any  intent  to  divert  it  from  such  use,  is  a  part  of  the  realty  ai^d  passes  by  a 
conveyance  of  the  farm  to  a  purchaser. 

Gas  and  water  pipes  running  under  the  floors  and  between 
the  walls  are  not  removable  fixtures,  but  gas  fixtures,  chande- 
liers and  water  faucets  screwed  in  through  holes  in  the  walls  or 


FIXTURES 


89 


floors  are  removable  when  erected  by  a  tenant.  Stoves  and 
furnaces  put  up  in  the  usual  way  by  a  tenant  are  treated  as  fur- 
niture and  are  removable,  but  if  built  into  brickwork  they  are 
non-removable  fixtures. 

In  McKeage  v.  Hanover  Ins.  Co.,  81  N.Y.  38,  it  was  held  that  gas  fixtures 
simply  screwed  on  to  the  gas  pipes,  and  mirrors  which  are  not  set  into  the 
wall  but  put  up  afterwards  and  supported  by  hooks  so  driven  into  the  wall 
that  they  can  be  removed  without  injuring  the  walls,  form  no  part  of  the  realty 
and  do  not  pass  by  deed  or  mortgage  of  the  premises. 

In  Towne  v.  Fiske,  127  Mass.  125,  it  was  held  that  a  portable  hot-air 
furnace  resting  by  its  own  weight  upon  the  ground,  put  into  a  house  by  a 
person  in  possession  under  an  agreement  for  a  deed  to  the  premises  to  be 
given  him,  does  not  become  a  part  of  the  realty,  although  connected  with  the 
house  by  a  cold  air  box  and  pipes  and  registers  in  the  usual  way.  So  gas 
fixtures  in  a  house,  although  attached  by  screws  to  pipes  are  not  a  part  of  the 
realty. 

Another  test  is  the  appropriation  of  the  chattel  to  the  use  or 
purpose  of  that  part  of  the  realty  to  which  it  is  connected.  It 
seems  that  an  article  which  is  essential  to  the  use  for  which  the 
building  or  land  is  designed,  or  which  is  especially  adapted  to 
the  place  where  it  is  erected,  is  regarded  as  a  non-removable 
fixture,  although  it  is  but  slightly  connected  with  the  realty. 
This  rule  is  illustrated  in  the  case  of  the  Ottumwa  Woolen  Mill 
Co.  V.  Hawley  on  page  87. 

In  Dudley  v.  Hurst,  67  Md.  44,  it  was  held  that  machinery  used  in  the 
canning  business,  part  of  which  is  attached  to  the  soil  and  other  parts  of  which 
are  necessary  to  the  use  of  the  part  so  attached,  is  a  fixture  that  will  pass  to 
the  mortgagee.  When  the  principal  part  of  the  machinery  is  a  fixture  by 
actual  annexation,  such  part  of  it  as  may  not  be  so  physically  annexed,  but 
which  if  removed  would  leave  the  principal  part  unfit  for  use  and  would  not 
of  itself,  standing  alone,  be  well  adapted  for  general  use  elsewhere,  is  consid- 
ered constructively  annexed. 

Bishop  V.  Bishop,  11  N.Y.  123,  held  that  poles  used  necessarily  in  cultivat- 
ing hops,  but  which  are  taken  down  for  the  purpose  of  gathering  the  crop  and 
piled  in  the  yard  with  the  intention  of  being  replaced  in  season  next  year,  are 
a  part  of  the  realty. 

In  McRea  v.  Central  Bank,  66  N.Y.  489,  plaintiff  as  mortgagee  claimed 
the  machinery  in  a  building  erected  expressly  for  use  as  a  twine  factory.  The 
machinery  was  heavy  and  was  fastened  to  the  floor  by  bolts,  nails,  and  cleats 
and  was  attached  to  the  gearing.    Most  of  the  machinery  could  have  been  re* 


90  SALES  OF  PERSOISTAL  PROPERTY 

moved  without  material  injury  to  the  building  and  used  elsewhere.  It  was  proved 
that  the  machinery  was  put  in  the  building  for  permanent  use.  Held,  that  the 
evidence  was  sufficient  to  find  an  intent  to  make  the  machinery  part  of  the 
realty.  The  court  said  the  criterion  of  a  fixture  is  the  union  of  three  requi- 
sites: I,  Actual  annexation  to  the  realty  or  something  appurtenant  thereto; 
2,  Application  to  the  use  or  purpose  to  which  that  part  of  the  realty  to  which 
it  is  connected  is  appropriated ;  3,  The  intention  of  the  party  making  the  an- 
nexation to  make  a  permanent  accession  to  the  freehold.  In  such  cases  the 
court  said  the  purpose  of  the  annexation  and  the  intent  with  which  it  is  made 
are  the  most  important  considerations. 

This  last  rule  in  the  case  of  McRea  v.  Central  Bank  does  not 
apply  between  landlord  and  tenant,  as  it  is  held  that  the  tenant 
can  not  intend  articles  for  permanent  use  on  land  that  does  not 
belong  to  him.  This  rule  inaugurates  the  theory  of  constructive 
annexation  and  is  contrary  to  the  common  law,  which  requires 
actual  annexation  to  the  realty. 

Snedeker  v.  Warring,  12  N.Y.  170,  was  a  casein  which  the  owner  of  realty, 
after  giving  a  mortgage,  placed  on  his  ground  in  front  of  his  house  a  statue  of 
Washington,  made  by  himself,  and  weighing  about  three  tons.  It  was  on  a 
base  three  feet  high.  This  base  rested  upon  a  foundation  built  of  mortar  and 
stone.  The  statue  was  not  fastened  to  the  base,  nor  the  base  to  the  founda- 
tion. Held,  that  the  statue  was  a  part  of  the  realty  and  that  it  was  as  firmly 
attached  to  the  soil  by  its  own  weight  as  it  could  have  been  by  clamps  and 
screws.  In  the  same  case  a  sun  dial,  similarly  placed,  was  also  held  to  be 
realty. 

Rogers  v.  Crow,  40  Mo.  91,  was  a  case  where  the  builders  of  a  church  left 
a  recess  in  which  an  organ  was  to  be  placed.  The  organ  was  required  to  com- 
plete the  design  and  finish  of  the  building  and  was  attached  to  the  floor  and 
intended  to  be  permanent.  Held,  that  the  organ  was  a  part  of  the  realty  and 
passed  to  the  purchaser  of  the  land. 

Force  pumps,  pipes,  and  shafting,  and  machinery  attached  by 
spikes,  nails,  and  butts,  are  part  of  the  realty. 

Symonds  v.  Harris,  51  Me.  14,  held,  that  machinery  used  in  a  sash  and 
blind  factory  and  attached  to  the  mill  by  spikes,  bolts,  and  screws,  and  which 
was  operated  by  belts  running  from  the  permanent  shafting  driven  by  a  water 
wheel  under  the  mill,  was  part  of  the  realty. 

Under  the  rule  of  constructive  annexation  some  cases  hold 
that  machinery,  permanent  in  its  character  and  essential  for  the 
purposes  of  the  building  becomes  realty,  although  not  actually 
attached  thereto. 


f/XTt/RES  91 

Illustrations  of  this  class  of  fixtures  are  ponderous  machinery 
kept  in  place  by  its  own  weight,  cotton  gins,  and  duplicate 
rollers  for  a  rolling  mill,  all  of  which  are  held  to  pass  with  the 
realty. 

Deal  V.  Palmer,  72  N.C.  582,  held  that  a  carding  machine  not  fastened  to 
the  house  and  requiring  several  men  to  move  it,  is  a  fixture,  and  passes  with 
the  land  to  a  purchaser. 

Other  cases  hold  that  machinery  is  personal  property  unless 
actually  annexed.  Such  cases  hold  that  heavy  machinery  in  a 
factory  screwed  to  the  floor  but  removable  without  injury  is  not 
realty. 

In  Hubbell  v.  Savings  Bank,  132  Mass.  447,  it  was  held  that  a  mortgage  of 
land  does  not  cover  machinery  upon  the  floor  of  a  building  on  the  land,  sup- 
ported by  iron  legs  fastened  to  the  floor  by  screws  only  for  the  purpose  of 
steadying  it,  and  which,  although  of  great  weight  and  adapted  for  use  in  the 
business  carried  on  in  the  building,  can  be  removed  without  injury  to  the 
building  and  used  elsewhere.  The  machinery  in  dispute  consisted  of  a  large 
engine  lathe,  a  small  engine  lathe,  an  iron  planer,  and  an  upright  drill. 

Relation  of  the  Parties.  — The  relation  of  the  parties  has  some 
weight  in  determining  the  character  of  the  fixtures.  As  between 
landlord  and  tenant  the  presumption  is  that  tenants  do  not 
intend  the  improvements  to  be  additions  to  the  realty,  and  they 
are  therefore  allowed  greater  rights  in  removing  the  chattels  than 
any  other  class  of  persons.  For  the  encouragement  of  trade 
and  the  promotion  of  industry  the  rule  has  been  established  that 
trade  fixtures  erected  by  a  tenant  are  removable.  A  carpenter 
shop,  a  ballroom,  and  a  bowling  alley  erected  on  blocks  or  posts 
have  all  been  held  to  be  removable. 

Holmes  v.  Tremper,  20  Johns.  (N.Y.)  29,  held,  that  a  cider  mill  and  press 
erected  by  a  tenant,  holding  from  year  to  year,  at  his  own  expense  and  for  his 
own  use  in  making  the  cider  on  the  farm,  are  not  fixtures  that  pass  with  the  realty. 

In  Conrad  v.  Saginaw  Mining  Co.,  54  Mich.  249,  it  was  held  that  as  be- 
tween landlord  and  tenant  under  a  mining  lease,  engines  and  boilers  erected 
by  the  tenant  on  brick  and  stone  foundations,  bolted  down  solidly  to  the 
ground  and  walled  in  with  brick  arches;  also' dwelling  houses  erected  by 
the  tenant  for  miners  to  live  in,  standing  on  posts  or  dry  stone  walls,  where  the 
intent  was  not  to  make  them  a  part  of  the  realty  but  merely  to  use  them  in 
the  mining  operations,  will  be  regarded  as  "  trade  fixtures "  and  may  oe 
removed  by  the  tenant  at  or  before  the  termination  of  the  lease. 


92  SALES  OF  PERSONAL  PROPERTY 

Carlin  v.  Ritter,  68  Md.  478,  held,  that  as  between  landlord  and  tenant 
wooden  structures  or  buildings  resting  by  their  own  weight  on  flat  stones  laid 
upon  the  surface  of  the  ground  without  other  foundation  are  not  part  of  the 
realty.  But  if  tlie  building  is  a  permanent  structure  on  a  foundation  it  becomes 
part  of  the  real  estate. 

The  tenant  must  exercise  his  right  to  remove  fixtures  before 
the  expiration  of  his  term.  If  he  does  not  remove  them  before 
he  Surrenders  the  premises,  he  can  not  reenter  and  claim 
them. 

In  Dostalv.  McCaddon,  35  Iowa  318,  defendant  after  his  lease  had  expired 
entered  upon  plaintiff's  premises  to  remove  a  vault  and  safe  he  had  constructed, 
and  this  action  was  brought  to  restrain  him  from  removing  them.  Held,  that 
the  tenant  could  not  exercise  his  right  of  removing  trade  fixtures  after  he  had 
surrendered  possession  of  the  premises. 

When  the  question  arises  between'  vendor  and  vendee  or 
mortgagor  and  mortgagee  the  presumption  is  stronger  against 
the  vendor  and  mortgagor,  as  being  the  owners  of  the  realty  they 
are  supposed  to  have  intended  the  improvements  to  be  perma- 
nent. The  parties  may  agree  that  the  chattels  annexed  are  to 
remain  as  personalty,  and  effect  will  be  given  to  the  agreement. 

In  Smith  v.  Whitney,  147  Mass.  479,  the  tenant's  lease  provided  that  he 
might  erect  buildings  for  manufacturing  purposes  and  remove  them  within 
the  limit  of  his  lease.  He  erected  a  brick  engine  house  complete  in  itself. 
The  engine  and  boiler  were  on  a  solid  foundation  of  masonry.  Held,  that  the 
tenant  had  a  right  to  remove  the  house,  and  the  engine  and  boiler  as  well. 

The  nice  question  as  to  whether  or  not  trees,  grass,  and  grow- 
ing crops  are  realty  or  personal  property  often  comes  up  and 
has  been  discussed  on  page  55. 


3.     PARTIES  TO  A  SALE 

Seller  and  Purchaser.  — The  parties  to  a  sale  are  the  seller  or 
vendor  and  the  purchaser  or  vendee.  The  general  rule  is  that 
no  man  can  sell  goods  and  convey  a  valid  title  unless  he  is  the 
owner  or  his  duly  authorized  agent.  Possession  is  not  an  essen- 
tial to  the  right  to  sell,  ownership  being  enough,  and  the  right- 
ful owner  can  sell  what  is  wrongfully  held  by  another. 


PARTIES   TO  A  SALE  93 

Webber  v.  Davis,  44  Me.  147,  was  an  action  to  recover  the  value  of  a  horse 
once  owned  by  defendant  and  which  was  stolen  from  him.  After  the  horse 
was  stolen  plaintiff  paid  defendant  $20  for  him  and  agreed  to  run  his  own  risk 
of  finding  him.  The  horse  was  worth  $60,  but  if  he  was  not  found,  plaintiff 
was  to  lose  his  $20.  A  few  weeks  afterwards  plaintiff  located  the  horse  but 
defendant  first  got  possession.  Held,  that  plaintiff  could  recover  on  the 
ground  that  title  will  pass  by  a  sale  without  delivery  from  the  true  owner, 
although  at  the  time  of  the  sale  the  goods  were  in  the  wrongful  possession  of 
a  third  person. 

Seller  must  have  Good  Title.  —  The  principle  of  a  holder  in 
good  faith  which  is  discussed  under  the  negotiable  instrument 
law  does  not  apply  in  the  sale  of  personal  property,  the  general 
rule  being  that  one  can  not  give  a  better  title  than  he  himself 
has. 

In  Williams  v.  Merle,  1 1  Wend.  (N.Y.)  80,  a  master  of  a  boat  took  four 
barrels  of  potash  from  plaintiff's  warehouse  and  turned  them  over  to  the  clerk 
of  his  principal,  the  boat  owner,  who  sold  them  to  defendant,  a  broker,  who 
paid  a  reasonable  price  for  them.  In  an  action  to  recover  them  it  was  held 
that  a  purchaser  of  personal  property  i?  not  protected  against  the  claim  of  the 
true  owner,  although  he  purchase  in  good  faith  and  for  a  valuable  considera- 
tion, if  the  vendor  has  no  title  or  authority  to  sell. 

In  Moody  v.  Blake,  117  Mass.  23,  A,  falsely  representing  himself  to  be  a 
member  of  a  firm,  bought  goods  in  their  name  from  plaintiff  who  sent  them  to 
the  firm.  On  the  refusal  of  the  firm  to  receive  them  A  got  possession  of  the 
goods  from  the  carrier  and  sold  them  to  defendant  who  bought  them  for  value 
and  in  good  faith.  Held,  that  plaintiff  could  recover  the  goods  of  defendant. 
The  defendant  had  no  better  title  than  his  vendor. 

However  innocent  therefore  the  person  may  be  who  buys 
property  from  one  not  the  owner,  he  obtains  no  title  whatever, 
except  in  a  few  special  cases,  as,  for  instance,  negotiable  instru- 
ments. It  follows  then  that  a  person  buying  goods  that  were 
either  lost  or  stolen  has  no  claims  on  them  as  against  the  true 
owner. 

Hoffman  v.  Carow,  20  Wend.  (N.Y.)  21,  held,  that  an  auctioneer  who  sells 
stolen  goods  is  liable  to  the  owner,  notwithstanding  that  the  goods  were  sold 
and  the  proceeds  turned  over  to  the  thief  without  knowledge  that  they  were 
stolen. 

A  thief  acquires  no  title  and  can  convey  none,  and  no  matter 
how  many  sales  or  transfers  of  the  property  there  may  have 


94  SALES  OF  PERSONAL  PROPERTY 

been  after  the  thief  disposed  of  it  before  it  came  into  the  posses- 
sion of  the  holder,  the  true  owner  can  recover.  It  makes  no 
difference  that  the  purchase  was  made  in  good  faith  and  for  full 
value. 

In  Breckenridge  v.  McAfee,  54  Ind.  141,  plaintiff  brought  an  action  for 
the  value  of  wheat  which  his  hired  man  had  stolen  and  sold  to  defendant. 
Held,  that  a  thief  acquires  no  title  to  property  stolen  and  can  confer  none  on 
a  person  to  whom  he  sells  the  same.  And  such  person  is  liable  to  the  owner 
for  the  value  of  such  goods  without  regard  to  his  innocence  or  good  faith  in 
making  the  purchase. 

Pledgee  may  Sell.  —  An  exception  to  the  rule  that  a  person 
not  the  owner  can  not  sell  personal  property  is  the  case  of  a 
pledgee,  or,  one  with  whom  the  chattels  are  left  as  security  for 
money  loaned,  as  he  can  sell  after  default  in  payment  by  the 
owner.  So  also  the  master  of  a  vessel  can  sell  the  cargo  in 
cases  of  absolute  necessity,  but  actual  necessity  must  exist  or 
the  purchaser  gets  no  title. 

Factor  may  Sell.  —  A  factor  or  commission  merchant  is  a  per- 
son to  whom  goods  are  shipped  or  consigned  for  the  purpose  of 
sale.  A  sale  made  by  him  conveys  a  good  title  and  binds  the 
original  owner  under  statutes  passed  in  most  of  the  states,  even 
though  he  goes  beyond  his  authority  and  sells  when  he  is  not 
authorized  to  do  so  by  the  owner ;  but  the  factor  or  commission 
merchant  must  have  actual  possession  or  he  will  not  give  a  good 
title  if  he  exceeds  his  authority.  This  statute  is  limited  to  mer- 
cantile transactions  and  applies  only  to  factors  or  commission 
merchants. 

If  the  owner  of  goods  trusts  the  possession  of  them  to  an- 
other, thereby  enabling  the  other  party  to  hold  himself  out  to  the 
world  as  having  not  only  the  possession  but  also  the  ownership 
of  the  goods,  a  sale  by  such  party  to  a  person  without  notice  who 
acted  upon  the  strength  of  such  apparent  ownership  will  bind 
the  true  owner,  if  the  person  having  possession  is  one  who  from 
the  nature  of  his  employment  might  ordinarily  be  taken  to 
have  the  right  to  sell. 

In  Nixon  v.  Brown,  57  N.H.  34,  plaintiff  employed  one  M  to  purchase  a 
horse  for  him.    M  bought  the  horse,  paid  for  it  with  plaintiff's  money,  and 


THE  CONTRACT  OF  SALE 


95 


took  the  bill  of  sale  in  his  own  name.  He  afterwards  informed  the  plaintiff 
of  what  he  had  done  and  showed  him  the  bill  of  sale,  but  plaintiff  allowed  him 
to  go  away  with  the  horse  and  the  bill  of  sale.  M  went  to  the  defendant,  who 
had  no  knowledge  of  the  agency,  showed  him  the  bill  of  sale  and  sold  him  the 
horse.  The  court  held  that  the  plaintiff  could  not  recover  the  horse  from  the 
defendant. 

As  we  have  learned  in  contracts  the  purchaser  must  be  a 
party  competent  to  contract  except  in  the  case  of  necessaries. 

4.    THE   CONTRACT  OF  SALE 

Contract  may  be  Executory  or  Executed.  —  The  contract  of 
sale,  like  other  contracts,  may  be  executory  or  executed.  In 
the  executory  contract  of  sale  the  title  has  not  passed  to  the 
purchaser.  It  is  simply  an  agreement  to  make  a  transfer  at 
some  future  time.  In  the  executed  contract  the  title  has  passed 
and  the  sale  is  complete.  At  the  time  of  the  sale  the  subject- 
matter  or  thing  sold  must  be  in  existence.  If  it  has  ceased  to 
exist,  the  sale  is  void. 

Dexter  v.  Norton,  47  N.Y.  62,  was  an  action  to  recover  damages  for  breach 
of  a  contract  by  defendant  to  sell  and  deliver  to  plaintiff  621  bales  of  cotton 
bearing  certain  marks  and  numbers  specified  in  the  contract  at  a  certain  price. 
After  defendant  had  delivered  460  bales  the  remaining  161  bales  were  destroyed 
by  fire  without  fault  or  negligence  of  the  defendant.  The  court  held  that 
where  a  contract  is  made  for  the  sale  of  certain  specified  articles  of  personal 
property  under  such  conditions  that  the  title  does  not  vest  in  the  vendee,  if 
the  property  is  destroyed  by  accident  without  the  fault  of  the  vendor  so  that 
delivery  becomes  impossible,  the  vendor  is  excused  from  delivery. 

Potential  Existence.  —  Regarding  the  sale  of  things  not  yet  in 
existence,  if  they  are  such  as  the  natural  products  or  expected 
increase  of  what  is  already  owned,  they  are  said  to  have  a 
"potential  existence"  and  may  be  sold.  Therefore  a  man 
may  sell  a  crop  of  hay  to  be  grown  on  his  fields,  the  wool 
to  be  clipped  from  his  sheep,  or  wine  to  be  produced  from  his 
vineyard. 

Argues  v.  Wasson,  51  Cal.  620,  was  an  action  to  recover  certain  grain  and 
flaxseed  taken  by  the  sheriff  on  an  execution  against  one  Hansen.  Hansen 
leased  land  from  plaintiff,  and  to  secure  the  rent  and  a  store  account  which  he 
owed  plaintiff  he  gave  him  a  mortgage  upon  all  the  crops  of  every  kind  to  be 


96  SALES  OF  PERSONAL  PROPERTY 

produced  on  the  land  during  the  next  ensuing  season.  When  the  mortgage 
was  given,  Hansen  was  in  possession,  but  had  not  plowed  the  land  nor  sowed 
the  seed.  As  soon  as  the  crops  were  harvested  the  sheriff  seized  them.  It 
was  claimed  that  as  the  crops  were  not  in  existence  at  the  time  the  mortgage 
was  given,  they  were  not  the  subject  of  sale  or  mortgage,  but  the  court  held 
that  they  were  the  product  of  property  which  the  mortgagor  possessed  at  the 
time,  and  the  crops  were,  as  it  is  said,  potentially  in  existence,  and  therefore 
the  subject  of  sale  or  mortgage. 

But  when  the  subject  of  the  contract  is  to  be  acquired  after- 
wards, as  the  land  from  which  one  expects  to  raise  the  hay  or 
grain,  or  the  sheep  from  which  one  expects  to  clip  the  wool,  the 
article  can  not  be  sold.  A  valid  agreement  however  may  be  made 
to  sell  it,  that  is,  an  executory  contract  to  sell  it  can  be  entered 
into.  The  question  as  to  whether  the  contract  of  sale  is  exe- 
cuted or  executory  is  important  when  the  property  is  lost  or 
destroyed,  for  if  it  is  an  executed  contract,  the  vendee  loses,  if 
it  is  executory,  the  vendor. 

When  Title  Passes.  —  We  may  here  ask,  when  does  the  title 
pass  from  vendor  to  vendee }  Is  it  when  the  goods  are  de- 
livered or  when  the  contract  is  completed }  The  answer  seems 
to  be  that  the  title  vests  in  the  vendee  immediately  upon  the 
completion  of  the  contract  of  sale  without  regard  to  the  fact  of 
whether  or  not  the  goods  are  delivered. 

In  Terry  v.  Wheeler,  25  N .  Y.  520,  there  was  a  sale  of  lumber  in  the  vendor's 
yard.  The  pieces  sold  were  designated  and  the  price  paid,  but  the  vendor 
agreed  to  deliver  the  lumber  at  the  railroad  station.  The  lumber  was  destroyed 
before  such  delivery.  Held,  that  it  was  an  executed  contract  of  sale.  The 
title  had  passed  and  the  loss  fell  on  the  purchaser. 

In  an  executory  contract,  it  being  but  a  promise  to  sell,  the 
title  does  not  pass  until  the  sale  is  completed. 

In  Fitch  V.  Beach,  15  Wend.  (N.Y.)  221,  there  was  an  agreement  for  the 
sale  of  a  boat  load  of  lumber,  part  of  which  was  landed  and  the  unloading  of 
the  remainder  suspended  until  an  inspector  could  be  procured  to  measure  it. 
After  waiting  a  day  the  vendor  reloaded  the  lumber  landed  and  went  away. 
In  an  action  for  wrongfully  taking  the  lumber  it  was  held  that  the  title  had 
not  passed,  as  something  remained  to  be  done  between  the  vendor  and  vendee, 
namely,  the  measuring  and  sorting  of  the  lumber.  The  only  remedy  would 
oe  damages  for  breach  of  contract. 


THE  CONTRACT  OF  SALE 


97 


It  is  often  difficult  to  determine  whether  the  parties  have 
entered  into  a  contract  of  sale  or  simply  into  an  agreement  to 
sell.     The  intention  of  the  parties  in  this  respect  is  controlling. 

In  Callaghan  v.  Myers,  8g  111.  566,  it  was  held  that  in  an  agreement  to  pur- 
chase a  lot  of  books,  if  a  part  of  the  price  is  paid,  possession  given,  and  the 
amount  to  be  paid  if  the  books  should  prove  to  be  as  represented  is  fixed,  the 
title  will  pass  as  against  the  creditor  of  the  vendor.  Whether  the  sale  is  com- 
plete and  the  title  passes  depends  upon  the  intention  of  the  parties. 

Intention.  —  When  the  intention  of  the  parties  is  not  clear, 
certain  rules  are  observed  in  determining  it.  If  the  chattels  in 
contention  are  not  agreed  upon,  or  are  not  separated  from  a 
larger  number  or  quantity,  it  is  clear  that  the  parties  intended 
only  an  executory  contract.  For  instance,  if  A  buys  10  horses 
out  of  a  drove  of  50,  there  is  no  complete  contract  until  the 
particular  10  have  been  designated  or  separated  from  the  rest. 
If  the  articles  are  not  ready  for  delivery,  or  there  is  still  some- 
thing to  be  done  on  them,  it  is  but  an  executory  agreement. 

McConihe  v.  New  York  &-»  Erie  Railroad,  20  N.Y.  495,  was  an  action  to 
recover  damages  upon  a  contract  under  which  plaintiff  was  to  furnish  material 
and  build  15  lumber  cars  for  the  defendant  at  $475  per  car,  to  be  paid  six 
months  from  the  date  of  delivery.  The  defendants  were  to  furnish  iron  boxes 
for  the  cars  of  a  model  made  by  them.  When  the  cars  were  completed,  ex- 
cepting the  part  prevented  by  the  default  of  the  defendants  in  not  furnishing 
the  boxes,  they  were  destroyed  by  fire  while  in  the  possession  of  plaintiff  and 
without  his  fault.  Held,  that  the  tide  to  the  cars  was  still  in  plaintiff,  and  he 
could  not  recover  for  labor  and  material. 

But  if  it  is  the  sale  of  an  article  in  bulk  the  title  passes, 
although  it  has  not  been  measured,  if  it  is  the  apparent  intent 
that  it  shall  pass  ;  and  in  the  cases  in  which  it  is  the  sale  of  part  of 
a  bulk  or  mass,  all  of  the  same  quality,  it  is  not  necessary  to  have 
the  part  sold  separated  in  order  to  have  the  title  pass. 

In  the  case  of  Chapman  v.  Shepard,  39  Conn.  413,  A  sold  B  a  quantity  of 
bags  of  meal  on  board  ship  at  a  certain  price  per  bag.  B,  without  paying  A, 
and  before  the  bags  were  counted,  sold  500  bags  to  C,  who  gave  his 
promissory  note.  Thereafter  C  informed  A  of  his  purchase  and  was  told  he 
could  remove  the  bags  when  he  pleased,  but  after  he  had  removed  part  A 
refused  to  let  him  remove  the  remainder.     Held,  that  the  title  had  passed  to 

COM.  LAW  —  7 


98  SALES  OF  PERSONAL  PROPERTY 

Innai  all  %n  \\  \m  ^um\%  % 

I.   Edwin  P.  Nichols,   of  Rochester,  Monroe  County,   New  York,  party 
o^ Me j^\6/ ^t/,  ^^  an^ i^n  condiaeia/ton  c/^/naAutn  e^    three  hundred 

dollars   ($300.00) '■ /ata4^ money  c/Me  ^nt^Ss^/ oTa&d., 

^    me     €n  Aan<//ia(</,  a^  oi  ■M^>ie  Me  enAea/tna  ana  ae/ively  c/ mede 

Meden^  ^y     Alhert  Connolly  of  the  same  place,  party 

€fMe  decona /lat/j  me  4eceej^^  taneleoietd  neie^u  ac^nout/ec/aea  f    have 
^aiaamea  ana  do/a,  ana  ^a  /nede  /Ueden/d-  ao        alan^ ana  conttey  an/o  Me 
daiaAal^y  o/Me  decont/^al^,     his    ecceca^oidj  aamehtii^ia^oid  anaaddcandj 
one  team  of  gray  horses,   one  heavy  wagon,- one  set  of  h&.mes8. 
one  top  huggy,   and  one  set  of  sleighs 

^0  have  an^  to  b0l6  Me^ameun/o  Medae^^l^y        o^Me  decone/ 
^04./,    "hts  eccecu/oid',  aamthcdAa/oid^  ana ^dd/ynd- ^.  ev^l.  tSm^  1     ao 

jw<  myself, my  nettd,  execu^oid  ana  ai/mmi4^a^otd;  cotienan/ ana  ayiee, /o 
anaimM  Me  dac'a ^al/y  —  o//n€  decona^ai/j  /o  tvaUan/ anel  aej^na  Me 

^a/e  o/MeAati/  property, — ~ Aeiecy  do/</ an/o  Me 

data^U  y   o//ne  dee»naAal/,       his    executotd,  aame'nuifta^id  ana 

addtand  aaamd/  a/(  ana  eveiy  ^eUon  ana^idond  wnoTndoeu^i. 

Tin  HClitnCSS  WbCtCOf,     I      ^ave  Aeleun^o  de^    my     Aan</  ane/ 
dea/    Me     second  euiy  o/  September^  t'n  Me yeal  one  Mc«dan</ 

nine  Aunmeef       and  five. 

Sealed  and  delivered  in  the  presence  of 

MtsAz  of New  York ) 

City. „f Bo  Chester....- >  5".  S. 

County  of..; M.Q.nr.o.e. J 

t^n  Me. Second af^y  o/.. .SeEtjemher. m  Me  yeai 

one  M^idana  nine  A^mmea.. and...l!l5r.e ii<^ie  fne  Aeidona/ry  came 

Edwin  P.  NlcholB, 

fo  /me  ^noiimj  anaAnoum  /o  me  io  /te  Me  ihcMWCMa/  iAsdciiveainj  an<iiono 

esxcu^a  Me  ^ica/^intr  indiiwmen/.  ana^ ^%,- - acAnotou«ae</ 

tAai   /le    eaxcuiea  Me  4ame.  ^^«<^%?^/^&^^-c^/^<.«*-' 

Com.  of  Seed! , 


« 


CONDITIONAL  'SALE  gg 

B,  as  it  was  the  evident  intent  of  the  parties  that  it  should,  and  it  had  also 
passed  from  B  to  C.  Upon  the  sale  of  a  number  of  articles  from  a  mass  of  the 
same  quality  and  value,  a  separation  of  the  part  sold  is  not  necessary  to  pass 
title ;  but  the  ruling  is  otherwise  when  the  articles  composing  the  mass  are 
of  different  qualities  and  values,  making  not  only  separation,  but  selection, 
necessary. 

Contracts  in  Writing.  —  By  the  statute  of  frauds,  certain  con- 
tracts of  sale  must  be  in  writing.  This  was  fully  treated  on  page  58 
in  the  chapter  on  contracts.  To  satisfy  the  statute,  the  writing 
need  not  be  in  any  particular  form,  but  must  contain  a  descrip- 
tion of  the  property  purchased  and  other  elements  of  the  agree- 
ment, signed  by  the  purchaser  or  party  to  be  charged.  In  sales 
of  any  importance  it  is  customary  to  execute  a  formal  bill  of  sale 
and  dehver  it  with  the  property  sold  as  illustrated  in  the  form 
on  the  preceding  page. 

It  is  a  safe  plan  to  require  a  bill  of  sale,  as  the  buyer  then 
has  the  warranty  of  title  from  the  vendor  as  well  as  a  formal 
certificate  that  he  is  the  owner  and  purchaser  of  the  property 
mentioned. 


5.    CONDITIONAL  SALE 

Installment  Sales.  —  We  have  discussed  sales  only  from  the 
standpoint  of  the  absolute  conveyance  or  transfer  of  the  prop- 
erty. We  now  take  up  those  cases  in  which  the  passing  of  the 
title  is  conditioned  upon  certain  acts  which  may  or  may  not  be 
performed.  It  is  common  in  business  for  certain  articles  such  as 
pianos,  sewing  machines,  or  wagons  to  be  sold  conditionally, 
the  title  to  remain  in  the  vendor  until  the  purchase  price  shall 
be  fully  paid.  This  mode  of  making  sales  is  employed  by  all 
installment  dealers  who  sell  goods  on  weekly  or  monthly  pay- 
ments. The  payment  of  the  last  installment  is  a  condition  prece- 
dent to  the  passing  of  the  title  to  the  purchaser.  As  between 
the  original  parties,  a  conditional  sale  is  valid  and  the  title  does 
not  pass  until  the  condition  is  fulfilled,  even  though  the  property 
is  given  into  the  possession  of  the  vendee  at  the  time  the  parties 
enter  into  the  contract 


lOO  SALES  OF  PERSONAL  PROPERTY 

McRea  v.  Merrifield,  48  Ark.  160,  was  an  action  to  recover  an  engine, 
sawmill,  and  lot  of  tools  sold  by  plaintiff  under  a  contract  of  sale  which 
expressly  agreed  that  the  title  should  remain  in  the  vendor  until  the  purchase 
price  was  fully  paid.  Payment  was  never  fully  made.  Held,  that  the  title 
did  not  pass  to  the  purchaser  until  the  payment  was  made.  The  contract  con- 
stituted a  conditional  sale  and  the  vendor  could  recover  the  property. 

But  the  doors  are  opened  for  the  entrance  of  fraud  if  the 
party  in  possession,  that  is,  the  vendee,  is  enabled  to  present 
every  appearance  of  ownership  when  the  title  does  not  rest  in 
him.  A  third  party  who  purchases  of  him  without  notice  of  the 
title  in  the  vendor  may  easily  be  imposed  upon  and  defrauded. 
Still  the  general  rule  is  that  in  the  absence  of  any  fraud  in  the 
conditional  sale  it  is  valid  against  third  persons.  The  seller  can 
give  no  better  title  than  he  possesses. 

Mcintosh  v.  Beam,  47  Ark.  363,  was  an  action  to  recover  a  mule  sold  con- 
ditionally by  plaintiff  to  a  third  party,  the  title  to  remain  in  the  vendor  until 
the  animal  was  paid  for.  The  mule  was  sold  by  this  third  party  to  defendant, 
who  bought  it  in  good  faith  for  a  valuable  consideration  and  without  notice  of 
the  conditional  sale.  Held,  that  the  plaintiff  could  recover.  The  purchaser 
acquired  no  better  title  than  his  vendor. 

Filing  Conditional  Contracts.  —  Statutes  have  been  passed  in 
many  of  the  states  requiring  every  such  contract  of  sale  to  be 
filed,  and  if  it  is  not,  the  condition  is  void  as  to  persons  who  buy 
of  the  party  in  possession  without  notice  of  the  conditional  con 
tract.  In  New  York,  in  a  few  special  cases,  the  delivery  to  the 
vendee  of  a  copy  of  the  contract  takes  the  place  of  filing. 

In  Moyer  v.  Mclntyre,  43  Hun  (N.Y.)  58,  plaintiff  on  August  5,  1885, 
sold  a  wagon  to  one  Smith  for  $72.50.  Five  dollars  was  paid  in  cash  and  a 
note  for  the  balance  was  given  by  Smith  to  plaintiff.  This  note  provided  that 
the  title  to  the  wagon  was  to  remain  in  plaintiff  until  the  note  was  paid,  and 
that  plaintiff  might  take  possession  of  the  wagon  whenever  he  felt  insecure. 
After  Smith  had  been  in  possession  of  the  wagon  about  eight  weeks  he  sold  it 
to  defendant,  who  took  it  without  notice  of  plaintiff's  claim,  paying  therefor 
$10  in  cash  and  applying  $55  on  an  old  debt  owing  to  him  by  Smith.  Plain- 
tiff tendered  defendant  $10  and  demanded  the  wagon.  Upon  being  refused  he 
brought  this  action  to  recover  it.  Held,  that  by  the  laws  of  1884  this  contract 
must  have  been  filed,  and  as  that  was  not  done  the  conditions  in  the  note  were 
void  as  to  defendant  who  purchased  in  good  faith  and  without  notice. 


CONDITIOJVAL  SALE  lOl 

Sale  on  Trial.  —  Sale  on  trial  or  on  approval  is  another  form 
of  conditional  sale,  the  goods  being  delivered  subject  to  the 
approval  of  the  intended  purchaser,  and  if  not  found  satisfac- 
tory or  as  represented,  they  are  to  be  returned.  If  they  are 
returnable  within  a  given  time  and  they  are  retained  beyond  that 
time,  it  will  be  presumed  that  the  purchaser  has  approved  and 
the  sale  is  absolute.  If  no  time  for  the  trial  or  examination  is 
agreed  upon,  it  must  be  made  within  a  reasonable  time,  and  if 
the  purchaser  does  not  accept  or  return  the  goods  within  a  rea- 
sonable time,  he  will  be  deemed  to  have  approved  and  the  sale  is 
consummated. 

When  anything  is  yet  to  be  done  to  the  goods  to  put  them  in 
a  deliverable  shape,  in  the  absence  of  a  contrary  intention,  the 
performance  of  these  things  is  a  condition  precedent  to  the  pass- 
ing of  the  title. 

In  Cornell  v.  Clark,  104  N.Y.  451,  a  railroad  company  entered  into  a  con- 
tract to  purchase  20,000  ties  at  55  cents  each  for  first-class  ties  and  35  cents 
for  what  should  be  adjudged  second  class.  They  were  to  be  delivered  by  the 
vendor  and  counted  and  inspected  by  a  person  named.  The  company 
advanced  1 5  cents  each  as  they  were  delivered.  The  ties  were  never  inspected 
nor  classified.  The  company  failed,  and  it  was  held  that  the  title  in  the  ties 
had  not  passed  to  the  company,  the  ties  requiring  yet  to  be  counted  and 
classified. 

Biitler  v.  Lawshe,  74  Ga.  352,  held,  that  if  there  was  an  agreement  by  which 
an  iron  press  was  to  be  sold  by  the  pound  and  was  to  be  weighed,  the  contract 
of  sale  was  executory  until  it  was' weighed,  but  if  the  price  was  fixed,  the  con- 
tract was  executed  on  delivery.  The  press  was  sent  by  the  vendor  to  the 
vendee  by  a  drayman  and  the  vendee  gave  instructions  as  to  where  it  was  to 
be  delivered.  The  jury  found  that  it  was  not  to  be  weighed,  therefore  the 
title  had  passed. 

Chattel  Mortgage.  —  The  chattel  mortgage  is  another  form  of 
conditional  sale.  It  consists  of  the  sale  of  certain  chattels  or 
goods,  subject  to  defeat  upon  the  payment  by  the  vendor  or 
mortgagor  of  a  certain  debt  or  the  performance  of  a  certain 
obligation.  It  differs  from  a  conditional  sale  in  that  the  title 
passes  to  the  purchaser  at  once,  but  it  is  liable  to  be  defeated 
upon  the  fulfilling  of  certain  conditions,  while  in  a  conditional 
sale  the  title  does  not  pass  until  the  conditions  are  fulfilled. 


102         SALES  OF  PERSONAL  PROPERTY 

McCoy  V.  Lassiter,  95  N.C.  88,  held,  that  the  difference  between  a  pledge 
and  a  chattel  mortgage  is  that  in  the  former  the  title  is  retained  by  the  pledgor, 
while  in  the  latter  it  passes  to  the  mortgagee. 

Delivery  to  the  pledgee  is  essential,  but  in  a  chattel  mortgage  it  k  not 
necessary  as  between  the  parties,  and  by  statute  filing  or  registration  is 
substituted  for  delivery  so  as  to  make  it  effective  as  against  third  parties, 
such  as  purchasers  or  creditors. 

Tannahill  v.  Tiittle,  3  Mich.  104,  held,  that  by  a  mortgage  of  chattels  the 
whole  legal  title  to  the  property  passed  to  the  mortgagee  conditionally. 

The  chattel  mortgage  is  a  means  frequently  employed  by  a 
borrower  of  money  to  secure  the  loan.  The  goods  may  remain 
in  the  possession  of  either  party,  but  if  they  are  allowed  to 
remain  in  the  mortgagor's  possession,  the  statutes  of  nearly 
all  of  the  states  require  that  the  mortgage  shall  be  filed  with 
some  public  officer,  where  it  may  be  open  to  the  inspec- 
tion of  the  public.  It  is  usually  required  to  be  filed  with 
the  town  clerk,  county  clerk,  or  registrar  of  deeds,  if  it  is  to 
be  binding  as  to  third  parties  who  may  buy  the  mortgaged 
property  in  good  faith  and  without  notice  of  the  mortgage. 
As  between  the  parties  themselves  the  mortgage  is  valid  with- 
out being  filed,  or  in  fact  without  being  executed  in  any  formal 
way. 

The  subject  of  chattel  mortgages  is  regulated  by  the  statutes 
of  the  several  states,  and  now  it  is  the  almost  universal  rule 
that  the  mortgagor  keeps  possession  of  the  goods  mortgaged, 
the  filing  of  the  mortgage  taking  the  place  of  the  change  of 
possession. 

Requirements  of  Mortgage.  —  The  mortgage  is  required  by 
statute  to  be  in  writing,  and  to  contain  the  names  of  the  parties 
and  a  description  of  the  property  covered.  The  filing  of  the 
mortgage  is  notice  to  all  the  world,  and  any  one  buying  the 
property  thereafter  is  supposed  to  have  notice  of  it.  In  New 
York  and  some  other  states  it  is  necessary  to  file  a  renewal  of 
the  mortgage  each  year,  and  a  failure  to  file  such  renewal  at 
the  expiration  of  the  year  renders  the  mortgage  of  no  more 
effect  than  if  it  had  never  been  filed. 

An  ordinary  form  of  chattel  mortgage  used  in  New  York 
state  is  shown  on  the  following  page  ;  — 


COIVDITIOIVAL  SALE 


103 


^0  all  t0  wbm  S!mt  f  te^ente  jOiMl  tome,  show  ie  that 


I,   Charles  Pollock,   of  Rochester,  Monroe  County,   New  York,   party 
of  the  first  part,  for  securing  the  payment  of  the  money  hereinafter  mentioned,  and  in  consideration  of 
the  sum  of  one  dollar  to_JBe____duly  paid  by- 


Edward  Frank,   of  the  eame  place,  party 


of  the  second  part,  at  or  before  the  ensealing  and  delivery  of  these  presents,  the  receipt  whereof  ia 
hereby  acknowledged,  have  bargained  and  sold,  and  by  these  presents  do  grant,  bargain  and  sell  unto 

the  said i^aHz^ of  the  second  part,    one    tvDev.-rltfir ,    ohb   typftwrit.pr  rtaak-, 

one  fireproof  safe,    and  six  office  chairs.— _ 

Co  tatte  ani  to  ftollJ,  all  and  singular  the  goods  and  chattels  above  bargained  and  sold,  or  intended 

so  to  be,  unto  the  said  v^rl^^ of  the  second  part,_.hi£_llfiirfl_^__executor8,  administrator* 

and  assigns  for  ever.  anJ 1 the  said  piHiyi of  the  first  part,  for   mynplf^ 

imc heirs,  executors  and  administrators,  all  and  singular  the  said  goods  and  chattels  above 

bargained  and  sold  unto  the  said  -part  y        nf  the  second  part,        >i1r heirs,  executors, 

administrators  and  assigns,  against myKPlf      _the  said  party  of  the  first  part 

and  against  all  and  Bvery  person  or  persons  whomsoever,  shall  and  will  warrant,  and  for  ever  defend. 

Opon  (ZtonHUion,  that  if 1 the  said  pari,}: of  the  first  part,  shall  and  do  well  and 

truly  pay  unto  the  said  pari^ of  the  second  part, hlfi_executors,  administrators  or  assigns, 

the  sum  of  Two  Hundred  Dollars  ($200.00)  according  to  the  terms 
of  a  note  this  day  executed  and  delivered  to  said  Edward  Frank, 
which  note  with  interest  thereon  will  fall  due  on  the  tenth 
day  of  March  in  the  year  one  thousand  nine  hundred  and  »ix, 

then  these  presents  shall  be  void.    Sntt._X___the  said  part j£ of  the  first  part,  for 

.  roygglf ,    my: executors,  administrators  and  assigns,  do  covenant  and  agree  to  and  with  the 

said  pari  y  of  the  second  part, _h±£L-execn tors,  administrators  and  assigns,  that  in  case  default 
shall  be  made  in  the  payment  of  the  said  sum  above  mentioned, XLtl.  tVip   intprpRt^    tharpon 

then  it  shall  and  may  be  lawful  for,  and I the  said  party. of  the  first  part,  do 

hereby  authorize  and  empower  the  said  party of  the  second  part_h.i&  hjeira-,_executor8,  ad* 

ministrators  and  assigns,  with  the  aid  and  assistance  of  any  person  or  persons,  to  enter the 

dwelling-house,  store,  and  other  premises  and  such  other  place  or  places  as  the  said  goods  or  chat* 
tels  are  or  may  be  placed,  and  take  and  carry  away  the  said  goods  or  chattels,  and  to  sell  and  dispose 
of  the  same  for  the  best  price  they  can  obtain;  and  out  of  the  money  arising  therefrom,  to  retain  ami 
pay  the  said  sum  above  mRnt.ionf-d,         with     t.hP    int.PrPRt    t.Tiprpnn 

and  all  charges  touching  the  same;  rendering  the  overplus  (if  any)  unto I21£_ 


or  to        Tny  ^^lp^  ra executors,  administrators  or  assigns.    Still  until  default  be  made  in  the 

payment  of  the  said  sum  of  money t^.f!   party   Of    thfi    first   part    IS 

to  remain  and  continue  in  the  quiet  and  peaceable  possession  of  the  said  goods  and  chattels,  and  the 
full  and  free  enjoyment  of  the  same.  If  from  any  cause  said  property  shall  fail  to  satisfy  said  debt, 
interest,  costs  and  charges,  the  cai.^      p'^^'^'y    °^  ^-'^^   first   Dart   doth    :  ^ 

rnvftnaTit      and  agree     to  pay  the  deficiency. 

5n  323itnf  0S  b)tn:eof,     I   «  tlm  said  Tparty of  the  first  part,  have  hereunto  set_m3C_ 

hand    and  sfoZ    the_Leiith day  of Sept  ffnhpr  1 one  thousand  nine  hundred 

and    fivp 


^^^^<v«:^ 


I04  '        SALES  OF  rERSONAL  FROFERTY 

Foreclosure.  —  After  default  in  the  payment  of  the  mortgage, 
the  mortgagee  must  foreclose  the  mortgage  in  order  to  cut  off 
all  of  the  rights  of  the  mortgagor.  The  procedure  differs 
under  the  statutes  of  the  different  states.  It  consists  in  giving 
notice  to  the  mortgagor  and  selling  the  property  at  public  sale. 
The  mortgage  itself  may  contain  provisions  for  the  foreclosure. 
The  mortgagor  is  usually  allowed  the  time  until  the  date  of  the 
sale  in  which  to  pay  the  amount  due  and  redeem  the  property 
mortgaged. 

6.    WARRANTIES 

Classification.  —  We  have  seen  that  a  condition  in  a  contract 
of  sale  which  is  required  to  be  performed  before  the  contract  is 
completed  will  defeat  the  sale  if  it  is  not  carried  out.  A  condi- 
tion is  one  of  the  essential  elements  of  such  a  contract.  Aside 
from  this  there  are  certain  warranties  which  are  collateral 
undertakings  on  the  part  of  the  seller  to  be  responsible  in  dam- 
ages if  certain  conditions  as  to  quality,  amount,  or  title  of  the 
article  are  not  as  represented.  The  warranty  is  a  separate  con- 
tract, and,  if  made  at  a  different  time  from  the  contract  of  sale, 
it  must  be  supported  by  a  separate  consideration.  If  made  at 
the  same  time,  the  consideration  of  the  sale  will  also  operate  as 
a  consideration  for  the  warranty.  There  are  two  classes  of 
warranty,  express  and  implied. 

Express  Warranty.  —  The  express  warranty,  as  its  title  would 
indicate,  is  an  express  undertaking  or  agreement  made  by  the 
seller.  No  special  form  of  words  is  necessary  to  create  a  war- 
ranty. Any  statement  framed  with  the  intention  of  making  a 
warranty  will  be  so  construed.  It  must  be  distinguished  from 
a  mere  expression  of  opinion  on  points  regarding  the  chattel,  of 
which  the  seller  had  no  special  knowledge  and  on  which  the 
buyer  may  be  expected  to  exercise  his  own  judgment,  A  war- 
ranty is  an  assertion  of  a  fact  of  which  the  buyer  is  ignorant. 

In  Hunter  v.  MclMitghlin,  43  Ind.  38,  the  vendor  in  selling  a  patent  right 
in  a  ditching  machine,  exhibited  the  letters  patent  and  the  model  and  stated  that 
if  properly  constructed  it  would  work  well.     It  was  claimed  that  it  was  prop- 


WAKKANnES  105 

erly  constructed  and  did  not  work  well.  It  was  not  shown  that  the  vendor 
had  ever  made  and  used  a  machine  constructed  after  this  model  or  that  he 
represented  that  he  had  made  and  used  one.  The  court  held  that  the  stiitements 
were  nothing  more  than  mere  expressions  of  opinion,  which  for  aught  that 
appeared  the  vendor  might  have  honestly  believed. 

Stroud  v.  Pierce,  6  Allen  (Mass.)  413,  held,  that  a  statement  by  a  piano 
agent  that  the  instrument  is  "  well  made  and  will  stand  up  to  concert  pitch  " 
is  a  warranty,  it  being  a  representation  of  fact. 

If  the  representation  is  a  warranty^  the  contract  will  not  be 
broken  by  a  breach,  but  an  action  for  damages  will  arise.  If  it 
is  a  mere  expression  of  opinion,  there  is  no  remedy  if  it  turns 
out  to  be  unfounded. 

In  Anthony  v.  Halstead,  yj  L.  T.  N.  S.  (Eng.)  433,  the  following  memo- 
randum was  given:  "Received  from  C.  Anthony,  Esq.,  ^60  for  a  black 
horse,  rising  five  years,  quiet  to  ride  and  drive,  and  warranted  sound  up  to  this 
date,  or  subject  to  the  examination  of  a  veterinary  surgeon."  Held,  to  be  a 
warranty  of  soundness  and  not  a  warranty  that  the  horse  was  quiet  to  ride  and 
drive. 

Burge  v.  Stroberg,  42  Ga.  88,  held,  that  a  statement  that  a  horse  is  fourteen 
years  old  is  a  warranty  that  he  is  no  older. 

Pritchard  v.  Fox,  4  Jones  (N.C.)  140,  held,  that  a  warranty  that  a  soda 
fountain  was  in  good  condition  is  broken  if,  from  inherent  defects  in  construc- 
tion existing  at  the  time  of  the  sale,  it  was  liable  to  get  out  of  order  from  time 
to  time. 

A  general  warranty  is  held  not  to  include  defects  apparent 
on  simple  inspection  and  requiring  no  skill  to  discover  them, 
nor  defects  known  to  the  buyer. 

In  Dean  v.  Morey,  33  low-a  120,  defendant  sold  to  plaintiff  a  horse  that  was 
a  cribber.  Held,  that  he  was  not  bound  to  disclose  this  fact  to  plaintiff,  as  the 
horse  was  subject  to  the  inspection  of  the  buyer,  and  a  simple  examination  of 
the  horse's  mouth  would  have  shown  the  defect. 

An  express  warranty  must  be  distinguished  from  the  mere 
praising  or  puffing  of  his  goods  by  an  owner ;  as,  the  statement 
by  an  agent  that  he  has  the  best  plow  on  the  market  or  by 
a  driver  that  his  team  is  the  best  in  the  city. 

Implied  Warranty.  —  Implied  warranty  differs  from  express 
warranty  in  that  although  it  exists  in  the  contract  of  sale,  it 
is  not  mentioned  or  stated  in  express  words.  In  every  contract 
of  sale  there  is  an  implied  warranty  of  title  when  the  goods  sold 


I06         SALES  OF  PERSONAL  PROPERTY 

are  in  the  possession  of  the  vendor  at  the  time  of  the  sale,  unless, 
of  course,  there  is  an  express  agreement  to  the  contrary ;  but  in 
cases  in  which  the  goods  are  in  the  possession  of  a  third  party, 
there  is  no  such  implied  warranty  and  the  purchaser  buys  at  his 
peril. 

In  Huntingdon  v.  Hall,  36  Me.  501,  defendant  sold  plaintiff  a  small  house 
which  was  on  another  man's  land  and  not  occupied  by  defendant.  There  was 
no  express  warranty  of  title.  This  action  was  brought  to  recover  damages  on 
an  implied  warranty  of  title,  as  defendant  did  not  own  the  house.  Held,  that 
there  was  no  implied  warranty  of  title  in  this  case.  The  implied  warranty 
arises  when  the  vendor  is  in  possession  of  the  chattel  himself,  but  when  the 
chattel  is  in  the  possession  of  another  the  purchaser  buys  at  his  peril. 

Long  V.  Hickingbottotn,  28  Miss.  772,  held,  that  in  the  sale  of  a  chattel,  if 
possession  at  the  time  is  in  another  and  there  is  no  covenant  of  warranty,  the 
rule  oi caveat  emptor  applies,  and  the  party  buys  at  his  peril.  But  if  the  seller 
has  possession  of  the  article  sold,  and  he  sells  it  as  his  own  and  for  a  fair  price, 
he  warrants  the  title. 

As  to  the  implied  warranty  of  quality,  we  find  the  maxim, 
caveat  emptor,  meaning  "  let  the  buyer  beware,"  to  be  the  gen- 
eral rule  of  our  law.  When  there  has  been  a  sale  of  specific 
goods  which  the  buyer  has  an  opportunity  to  inspect,  he  buys 
at  his  own  risk  as  to  quality,  unless  there  is  an  express  war- 
ranty.    There  is  no  implied  warranty  of  the  quality. 

In  Frazier  v.  Harvey,  34  Conn.  469,  defendant  sold  to  plaintiff  some  hogs 
which,  unknown  to  both  parties,  had  a  disease  of  which  they  died  later.  This 
was  an  action  on  the  implied  warranty  of  soundness  of  the  hogs.  Held,  that 
when  there  is  no  express  warranty  and  no  fraud  in  the  sale  of  personal  prop- 
erty, the  purchaser  takes  the  risk  of  its  quality  and  condition. 

But  when  the  chattel  is  to  be  made  or  supplied  to  the  order 
of  the  purchaser,  there  is  an  implied  warranty  that  it  is  reason- 
ably lit  for  the  purpose  intended,  if  that  purpose  is  commu- 
nicated to  the  seller. 

Tabor  v.  Peters,  74  Ala.  90,  held,  that  the  vendor  of  a  patent  churn,  being 
himself  the  manufacturer,  and  contracting  to  furnish  the  purchaser  with  a 
quantity  of  churns,  must  be  held  to  have  warranted  that  they  were  useful  and 
reasonably  suitable  for  the  intended  purpose ;  and  if  they  proved  to  be  worth- 
less, there  would  be  a  breach  of  the  implied  warranty  which  would  be  a  good 
defense  against  an  action  for  the  purchase  price.  . 


WARRANTIES  I07 

If  the  sale  is  by  sample,  there  is  an  implied  warranty  that 
the  quality  of  the  bulk  is  equal  to  that  of  the  sample. 

In  Myer  v.  Wheeler,  65  Iowa  390,  plaintiff  sold  defendant  10  car  loads  of 
barley  like  sample,  to  be  delivered  from  time  to  time.  Defendants  had  never 
seen  the  barley.  Held,  that  there,  was  a  warranty  that  the  barley  would  be 
equal  to  the  sample. 

In  Graff  v.  Foster,  67  Mo.  512,  defendant  bought  some  oranges  of  plaintiff, 
to  be  like  samples  exhibited  by  plaintiff.  In  an  action  for  the  purchase  price, 
defendant  claimed  that  the  oranges  were  greatly  inferior  in  quality  to  sam- 
ple, and  set  up  breach  of  the  implied  warranty.  Held,  that  it  is  not  necessary 
that  the  word  "warranty"  shall  be  used.  It  is  sufficient  if  the  seller  under- 
takes that  the  goods  shall  be  as  represented.  So,  if  the  seller  exhibits  sam- 
ples as  fair  specimens  of  the  stock  and  agrees  to  deliver  goods  equal  in  quality 
to  the  samples,  and  the  purchaser  buys,  relying  on  this  promise,  it  is  a  warranty. 

To  constitute  a  sale  by  sample  it  must  appear  that  the  con- 
tract of  the  parties  was  made  solely  with  reference  to  the  sample 
exhibited. 

In  Day  v.  Raguet,  14  Minn.  273,  plaintiff  sold  to  defendant  whisky  which 
was  to  be  five  per  cent  better  than  a  sample  shown.  Held,  that  it  was  not 
a  case  of  sale  by  sample. 

In  a  sale  by  description  there  is  an  implied  warranty  that  the 
goods  shall  be  salable  or  merchantable,  aside  from  the  fact  that 
a  condition  precedent  to  the  sale  is  that  the  goods  shall  answer 
the  .description.  In  such  a  case,  the  buyer  having  no  opportu- 
nity to  inspect  the  goods,  the  rule  of  caveat  emptor  does  not 
apply,  and  the  buyer  has  a  right  to  expect  that  he  is  getting  a 
salable  article  answering  the  description  in  the  contract,  and 
not  an  article  that  is  worthless. 

In  Weiger  v.  Gould,  86  111.  180,  plaintiff  sold  defendant  oats  and  represented 
them  to  be  a  good  grade  of  white  oats,  such  as  defendant  was  purchasing  at 
forty  cents.  Held,  that  he  must  deliver  merchantable  oats  and  can  not  deliver 
wet,  dirty  oats. 

When  a  person  buys  of  a  manufacturer  an  article  made  for  a 
particular  purpose,  there  is  an  implied  warranty  that  it  is  fit  for 
the  desired  purpose,  also  that  it  is  free  from  latent  defects  aris- 
ing from  the  process  of  manufacture  and  unknown  to  the  pur- 
chaser which  render  the  article  unfit  for  the  purpose  intended. 


I08  SALES  OF  PERSONAL  PROPERTY 

In  Rodgers  v.  Niles,  1 1  Ohio  St.  48,  defendant  agreed  with  plaintiff  that  he 
would  deliver  to  him  at  a  future  time  three  steam  boilers  with  which  to  run  the 
engines  in  his  roller  mill.  Held,  that  there  was  an  implied  warranty  that 
the  boilers  should  be  free  from  all  such  defects  in  material  or  workmanship, 
either  latent  or  otherwise,  as  would  render  them  unfit  for  the  usual  purpose." 
of  such  boilers. 

Delivery  and  Payment.  —  To  complete  the  sale  it  is  necessary 
for  the  seller  to  deliver  the  goods  and  for  the  purchaser  to  pay 
for  them,  and  unless  there  is  an  express  agreement  to  the 
contrary  these  acts  are  concurrent.  Delivery  in  this  sense  does 
not  necessarily  mean  the  passing  of  the  article  itself,  but  rather 
the  passing  of  the  ownership  or  title.  That  is  to  say,  the  delivery 
need  not  be  actual ;  it  may  be  constructive.  It  is  actual  when 
the  article  itself  is  handed  over.  It  is  constructive  when  a  bill 
of  sale  or  a  receipt  is  handed  over  instead. 

7.  REMEDIES  FOR   BREACH 

Rights  of  Vendor.  —  The  parties  may  not  fulfill  their  contract 
of  sale  and  the  question  then  arises  as  to  what  are  their  respec- 
tive rights.  The  vendee  may  refuse  to  complete  the  contract  of 
sale  by  declining  to  accept  the  goods,  or  after  accepting  and 
retaining  the  goods,  he  may  refuse  to  pay  the  purchase  price. 
In  case  the  goods  have  not  been  delivered  and  the  title  has 
not  passed  to  the  purchaser,  the  vendor  may  elect  to  avail 
himself  of  any  one  of  three  remedies.  First,  he  may  resell 
the  goods,  after  having  tendered  them  and  been  refused,  and 
recover  damages  for  the  loss,  if  any.  Second,  he  may  hold  the 
goods  for  the  vendee  and  sue  for  the  entire  purchase  price,  or, 
as  his  third  remedy,  he  may  keep  the  goods  and  sue  for  the 
damages,  which  will  be  the  difference  between  the  contract  price 
and  the  market  price  at  the  time  and  place  of  delivery. 

Diistan  V.  McAndrew,  44  N.Y.  72,  was  an  action  brought  on  a  contract  for 
the  sale  of  certain  hops,  which  defendant  had  refused  to  take.  Plaintiff  placed 
them  in  the  hands  of  a  broker  who  sold  them  for  a  fair  price  and  then  brought 
this  action  for  the  difference  between  the  contract  price  and  the  price  for 
which  the  hops  were  sold.  The  court  held  for  plaintiff,  and  said  that  on  the 
failure  of  the  purchaser  to  perform,  the  vendor  as  a  general  rule  has  his  choice 


REMEDIES  FOR  BREACH  I09 

of  three  remedies:  (1)  To  hold  the  property  for  the  purchaser  and  recover 
of  him  the  entire  purchase  money.  (2)  To  sell  it,  after  notice  to  the  pur- 
chaser, as  his  agent  for  that  purpose,  and  to  recover  the  difference  between 
the  contract  price  and  that  realized  at  the  sale.  (3)  To  retain  it  as  his  own 
and  recover  the  difference  between  the  contract  price  and  the  market  price  at 
the  time  and  place  of  delivery. 

Bagley  v.  Findlay,  82  111.  524,  was  a  case  in  which  the  purchaser  refused 
to  take  the  goods  for  which  he  had  contracted  and  the  court  said,  <'  When  the 
vendee  of  specific  goods  refuses  to  take  and  pay  for  them,  the  vendor  may 
store  them  for  the  vendee,  giving  him  notice  that  he  has  done  so,  and  then 
recover  the  full  contract  price ;  or  he  may  keep  the  goods  and  recover  the 
excess  of  the  contract  price  over  and  above  the  market  price  of  the  goods 
at  the  time  and  place  of  delivery;  or  he  may,  upon  notice  to  the  vendee, 
proceed  to  sell  the  goods  to  the  best  advantage  and  recover  of  the  vendee 
the  loss  if  they  fail  to  bring  the  contract  price." 

Some  cases  do  not  allow  the  first  remedy  mentioned  in 
Diistan  V.  Mc Andrew,  and  hold,  that  the  vendor  can  either  re- 
tain the  goods  and  sue  for  the  difference  between  the  contract 
price  and  the  market  value,  or  resell  the  goods  and  sue  for  the 
loss.  But  in  the  case  of  a  resale  the  vendor  must  be  fair  and 
obtain  the  reasonable  value  of  the  article,  as  otherwise  the  price 
received  will  be  disregarded  and  the  difference  between  the 
market  price  and  the  contract  price  will  rule. 

If  the  title  and  possession  have  passed  to  the  purchaser,  the 
only  remedy  is  an  action  against  the  purchaser  for  the  contract 
price,  or  if  not  for  the  contract  price,  for  the  reasonable  value 
of  the  goods.' 

Stoppage  in  Transitu.  —  There  is  another  class  of  remedy  by 
which  the  seller  may  obtain  the  purchase  price  if  the  title  has 
passed  to  the  buyer  but  the  physical  possession  is  in  the  vendor, 
and  that  arises  from  his  lien  upon  the  goods.  As  soon  as  the 
goods  are  in  the  actual  possession  of  the  vendee  the  lien  is  lost. 
After  the  title  may  have  passed  to  the  purchaser,  still  the  actual 
possession  or  custody,  as  we  have  learned,  may  yet  be  in  the 
vendor,  or  the  goods  may  be  in  transit;  that  is,  on  the  road  to 
delivery,  in  the  possession  of  the  railroad  or  express  company. 
When  the  goods  are  in  the  custody  of  the  seller,  he  may  hold 
them  under  his  lien  for  the  purchase  price,  and  when  in  transit 
the  law  gives  the  unpaid  vendor  the  right  to  intercept  them. 


no         SALES  OF  PERSONAL  PROPERTY 

if  he  can,  and  thereby  prevent  them  from  reaching  the  pur- 
chaser. This  right,  called  "  stoppage  ui  transitu^'  exists  when 
the  purchaser  becomes  insolvent  after  the  sale  or  was  insolvent 
when  the  sale  was  made,  though  the  fact  was  unknown  to  the 
vendor.  The  right  of  stoppage  in  transitu  extends  not  only  to 
the  vendor  himself  but  to  an  agent  who,  upon  the  order  of  his 
principal,  has  purchased  goods  and  paid  for  them  with  his  own 
money.  So  also  a  third  person  who  advances  the  money  for  the 
purchase  and  takes  an  assignment  of  the  bill  of  lading  can  ex- 
ercise the  right  of  stoppage  in  transitu. 

In  Gossler  v.  Schepeler,  5  Daly  (N.Y.)  476,  plaintiff  advanced  the  money 
on  a  cargo  of  iron  for  defendant  and  received  the  bill  of  lading  as  security  for 
the  advance.  Plaintiff  sent  the  bill  of  lading  to  defendant,  who  became  insol- 
vent before  he  received  the  goods.  Held,  that  plaintiff  could  stop  the  goods 
in  transit  and  could  retake  them  and  compel  the  defendant  to  deliver  to  him 
the  bill  of  lading. 

This  right  can  be  exercised  only  against  an  insolvent  or  bank- 
rupt person.  By  an  insolvent  is  meant  one  unable  to  pay  his 
debts  in  the  usual  course  of  his  business. 

In  O'Brien  v.  Norris,  16  Md.  122,  it  was  held  that  the  right  of  stoppage  in 
transitu  was  not  defeated  by  showing  that  the  vendee  was  actually  insolvent 
at  the  time  of  the  purchase,  unless  it  was  shown  that  such  insolvency  was 
known  to  the  vendee,  when,  of  course,  he  would  be  held  to  have  contracted 
with  that  in  mind.  Technical  insolvency,  as  being  declared  a  bankrupt,  is  not 
necessary,  and  suspending  of  payment  is  sufficient  to  justify  a  vendor  in  exer- 
cising the  right  of  stoppage  in  transitu. 

In  Durgy  Cemefit  Co.  v.  O^Brien,  123  Mass.  12,  it  was  held  that  the  feet 
that  the  vendee's  notes  went  to  protest  because  of  his  inability  to  pay  them  in 
the  regular  course  of  business  was  sufficient  to  justify  plaintiff  in  exercising 
the  right  of  stoppage  in  transitu. 

If  the  vendor  stops  the  goods  when  the  purchaser  is  solvent, 
he  does  so  at  his  peril,  and  will  be  obliged  to  deliver  the  goods 
in  addition  to  becoming  liable  for  damages  to  the  vendee.  In 
order  to  exercise  the  right  the  goods  must  be  in  transit.  It  is 
held  that  the  transit  begins  when  the  seller  has  delivered  the 
custody  of  the  goods  to  the  carrier  and  extends  to  the  time 
when  the  actual  possession  and  custody  of  the  goods  are  ac- 
quired by  the  purchaser.     In  other  words,  the  goods  are  liable 


REMEDIED  FOR  BREACH  HI 

to  stoppage  in  transitu  as  long  as  they  are  in  the  possession  of 
the  v^arrier,  and  as  soon  as  delivered  to  the  buyer  or  his  agent 
the  right  ceases.  No  particular  form  is  necessary  in  order 
to  exercise  this  right.  It  is  simply  required  that  notice  be 
given  the  carrier  not  to  deliver  the  goods,  and  that  it  be 
given  in  time  for  the  carrier  or  transportation  company,  by 
using  reasonable  diligence,  to  notify  its  agents  to  hold  them. 
The  usual  mode  is  a  notice  to  the  carrier  stating  the  vendor's 
claim  and  forbidding  delivery  to  the  vendee  or  requiring  that 
the  goods  be  held  subject  to  the  vendor's  orders. 

In  Jones  v.  Earl,  37  Cal.  630,  the  vendor  delivered  to  the  agent  of  the  car- 
rier in  possession  of  the  goods,  a  letter  to  the  effect  that  the  vendee  had  been 
served  with  an  attachment  and  that  he  desired  to  save  the  goods.  He  gave 
the  agent  a  bill  of  particulars  of  the  goods  and  directed  him  to  deliver  them  to 
no  one  but  the  vendor's  agent,  who  would  be  there  to  look  after  them.  Held, 
to  be  a  sufficient  notice  to  stop  the  delivery  of  the  goods. 

In  Mottram  v.  Heyer,  5  Denio  (N.Y.)  629,  plaintiff  made  demand  of 
the  defendants  when  the  goods  were  in  the  customhouse  and  after  the  bills 
of  lading  and  freight  receipts  had  been  given  to  defendants.  Defendants 
were  insolvent.  Held,  that  this  demand  was  not  sufficient.  It  must  be  made 
of  the  carrier,  in  whose  custody  the  goods  are,  under  such  circumstances  that 
the  carrier  may  prevent  their  delivery  to  the  vendee.  The  vendor's  right  of 
stoppage  in  transitu  does  not  cease  on  the  arrival  of  the  goods  at  the  point 
of  delivery,  but  when  they  come  into  the  vendee's  actual  or  constructive 
possession. 

-  The  right  of  stoppage  in  transitu  is  defeated  in  case  the  bill 
of  lading  is  in  the  hands  of  the  vendee  and  he  transfers  it  to  a 
third  person  who  in  good  faith  pays  value  for  it.  The  third 
party  can  hold  the  goods. 

Rights  of  Vendee.  —  We  have  treated  thus  far  only  of  the 
rights  and  remedies  of  the  vendor.  There  are  also  eft-tain 
rights  that  the  buyer  has  which  it  is  necessary  for  us  to  con- 
sider. The  vendor  may  fail  to  deliver  the  goods  or  there  may 
be  some  defect  in  the  goods  delivered.  When  the  vendor 
refuses  to  deliver  the  goods  and  the  title  to  them  has  not 
passed  to  the  buyer,  the  buyer's  remedy  is  to  sue  for  damages 
for  breach  of  the  contract.  If  the  purchase  price  is  unpaid,  the 
damages  will  be  the  difference  between  the  contract  price  and 
the  market  price  of  the  goods  at  the  time  and  place  of  delivery, 


112         SALES  OF  PERSONAL  PROPERTY 

but  if   the  purchase  price  has   been  paid,  this  sum  should  be 
added  to  the  amount  that  may  be  recovered. 

In  HarralsoH  v.  Stein,  50  Ala.  347,  it  was  held  that  a  purchaser  can  recover 
as  damages  from  a  vendor  who  1-efuses  or  fails  to  deliver  the  goods  bought,  the 
difference  between  the  agreed  price  and  the  market  price  at  the  time  they 
ought  to  have  been  delivered,  that  is,  the  loss  which  the  vendee  would  suffer 
if  he  had  to  go  out  and  buy  the  articles  in  the  market. 

Specific  Performance. — Another  remedy  is  offered  the  buyer 
in  certain  few  cases,  and  that  is  specific  performance.  Gener- 
ally damages  for  the  breach  is  an  adequate  remedy,  but  when, 
because  of  the  peculiar  nature  of  the  property  and  the  difficulty 
of  obtaining  it  elsewhere,  specific  performance  alone  can  com- 
pensate the  vendor,  it  will  be  granted  by  a  court  of  equity. 

Treasurer  v.  Cotnmercial  Mining  Co.,  23  Cal.  390,  was  an  action  to  compel 
the  defendant  to  issue  to  plaintiff  46  shares  of  capital  stock  of  the  company. 
It  was  shown  that  the  stock  had  no  fixed  market  value,  that  it  was  fluctuating 
and  uncertain  in  value,  and  therefore  the  damages  arising  from  a  breach  of  the 
contract  to  deliver  such  stock  could  not  be  ascertained.  Held,  that  specific 
performance  would  be  allowed,  because  damages  would  not  afford  a  full  and 
adequate  remedy. 

When  the  goods  delivered  do  not  correspond  to  the  articles 
sold,  the  buyer  may  rescind  the  contract  and  sue  for  damages. 
Also,  if  some  warranty  has  been  violated,  he  can  recover  damages, 
although  he  will  not  be  allowed  to  return  the  goods  if  the  title 
has  passed  to  him,  but  the  contrary  is  the  rule  when  the  title 
has  not  passed  to  the  buyer. 

QUESTIONS  ON  SALES  OF  PERSONAL  PROPERTY 

1.  pefine  a  sale.     Distinguish  between  a  sale  and  a  gift. 

2.  distinguish  between  sale  and  barter.     Between  sale  and  bailment. 

3.  A  delivers  to  B  100  yards  of  cloth  to  be  made  into  coats.  When  the 
coats  are  nearly  completed  B's  shop  burns  and  the  coats  are  destroyed.  Upon 
whom  will  the  loss  fall? 

4.  Brown  delivered  two  black  walnut  logs  at  Smith's  sawmill.  Smith  in 
return  was  to  give  him  500  feet  of  planed  pine  lumber.  What  was  the  trans- 
action, a  sale,  a  barter,  or  a  bailment  ? 

5.  Distinguish  between  real  and  personal  property. 

6.  Define  fixtures. 

7  Mention  the  three  requisites  which  are  necessarily  combined  to  make 
a  fixture  a  part  of  the  realty  as  laid  down  in  McCrea  against  Central  Bank. 


SALES  OF  PERSONAL  PROPERTY  II3 

8.  Under  the  common  law  which  of  these  three  is  the  most  important? 

9.  In  a  majority  of  the  cases  at  the  present  time  whicii  of  tiiese  requisites 
eeems  to  be  controlling? 

10.  Higgins  owned  some  land  which  was  mortgaged  to  Green.  He  erected 
on  this  land  a  sawmill  and  placed  therein  an  engine  which  was  built  in  ma- 
sonry, and  put  in  other  machinery  which  was  fastened  to  the  floor,  all  of  which 
he  intended  at  the  time  to  be  permanent.  Green  foreclosed  the  mortgage  and 
obtained  the  property.     Who  was  entitled  to  the  engine  and  machinery  ? 

11.  In  the  above  case,  if  the  machinery  had  been  set  on  the  floor  and  held 
there  by  its  own  weight,  who  would  have  been  entitled  to  it? 

12.  Edwards,  who  is  the  owner  of  a  house  and  lot,  is  repairing  and  paint- 
ing his  house.  While  the  painters  are  at  work  the  blinds  are  removed  for  the 
purpose  of  painting.  Before  they  are  replaced  Edwards  sells  the  house  and 
lot  to  Gray.  Are  the  blinds  a  part  of  the  realty  which  passes  to  Gray,  or  are 
they  personal  property,  and  can  Edwards  remove  them? 

13.  In  the  above  case  do  the  chandeliers  and  gas  fixtures  which  are  screwed 
into  the  gas  pipes  pass  to  Gray  or  remain  the  property  of  Edwards? 

14.  Do  the  gas  and  water  pipes,  themselves,  pass  with  the  realty  to  Gray 
or  remain  the  property  of  Edwards? 

15.  Wells,  who  rents  a  house  of  Myles,  places  a  furnace  in  the  cellar  and 
connects  it  with  the  house  by  pipes  and  registers  in  the  usual  way.  It  is  not 
attached  to  the  floor.  When  Wells  moves,  Myles  refuses  to  allow  him  to  take 
the  furnace,  claiming  it  belongs  to  the  realty.     Who  gets  the  furnace? 

16.  A  large  stamping  machine  weighing  ten  tons  is  used  in  a  building  on 
B's  land  which  passes  to  C,  the  purchaser,  under  a  mortgage  foreclosure.  The 
machine  is  not  fastened  to  the  building,  but  kept  in  place  by  its  own  weight. 
To  which  does  it  belong,  B  or  C  ? 

17.  In  the  above  case  if  B  had  been  merely  a  tenant  and  had  placed  the 
stamping  machine  in  the  building  for  his  own  use  and  C  had  been  the  owner 
of  the  land,  could  B  have  removed  the  machine  at  the  end  of  his  tenancy,  or 
would  it  have  become  the  property  of  C?  If  B  had  left  the  machine  in  the 
building  and  ten  days  after  his  tenancy  expired  had  gone  back  to  claim  it, 
would  he  have  been  entitled  to  it  ? 

18.  Name  the  parties  to  a  sale.     Who  can  sell  ?  r- 

19.  B  sold  to  Smith  a  horse  which  had  broken  out  of  the  pasture  lot  and 
wandered  away,  its  whereabouts  at  the  time  being  unknown  to  its  owner. 
Later  it  came  back  to  B's  farm  and  Smith  claimed  it.     Could  he  recover  ? 

20.  Gordon  loses  his  watch  and  it  is  afterwards  picked  up  on  the  street  by 
Hogan,  a  jeweler.  Hogan  puts  it  in  his  shop  and  sells  it  to  Lane.  Gordon 
discovers  it  in  the  possession  of  Lane  and  sues  for  its  recovery.  Lane  bought 
the  watch  in  good  faith,  believing  it  to  belong  to  Hogan,  and  paid  what  it  was 
reasonably  worth.     Who  gets  the  watch  ? 

21 .  In  the  above  case,  if  Hogan  had  stolen  the  watch,  would  the  result  have 
been  any  different  ? 

COM.  1  AW  —  8 


ri4        SALES  OF  PERSONAL  PROPERTY 

22.  C,  a  commission  merchant,  receives  a  car  load  of  watermelons  from  Lo- 
gan &  Co.,  with  instructions  to  hold  them  until  Logan  &  Co.'s  agent  arrives. 
C  sells  them  to  Weaver  as  soon  as  they  are  received.  Logan  &  Co.  brings  an 
action  against  Weaver  to  recover  them.     Who  is  entitled  to  the  melons? 

23.  A,  a  horse  dealer,  sends  B,  his  employee,  to  Canandaigua  with  his 
horse  authorizing  him  to  buy  another  horse  at  that  place  to  match  him.  In- 
stead of  carrying  out  his  instructions  B  sells  the  horse  to  C.  A  brings  an 
action  to  recover  the  horse  from  C.     Who  owns  the  horse? 

24.  Clark,  a  farmer,  sells  to  Spence  in  the  spring,  the  hay  and  corn  that  he 
shall  raise  on  his  farm  during  the  coming  season.  The  corn  has  not  yet  been 
planted.     Is  the  sale  good? 

25.  Clark  also  sells  to  Spence  the  wool  from  100  sheep  which  he  agrees  to 
buy  within  30  days,  but  which  he  does  not  yet  own.     Is  the  sale  good? 

26.  B  goes  to  A,  a  cattle  dealer,  and  out  of  a  herd  of  50  cattle  in  the  field 
buys  10,  pays  for  them,  and  promises  to  take  them  the  next  day.  Without 
picking  out  the  particular  10,  he  leaves.  Has  the  title  in  these  10  passed  to 
B  or  is  it  still  in  A? 

27.  In  the  above  case  suppose  B,  before  leaving,  picked  out  and  branded 
the  10  cattle,  paid  the  purchase  price,  and  agreed  to  call  and  drive  them  away 
the  next  day.     Did  the  title  pass  to  B  or  was  it  still  in  A? 

28.  A  also  goes  to  C,  a  grain  merchant,  and  buys  50  bushels  of  wheat  out 
of  a  bin  containing  several  thousand  bushels.  He  pays  for  the  wheat,  but  it  is 
not  measured.  That  night  the  warehouse  burns.  Upon  whom  does  the  loss 
of  the  50  bushels  of  wheat  fall,  A  or  C? 

29.  Define  a  conditional  sale. 

30.  Mahoney  buys  a  stove  from  Fisher,  paying  $5  down  and  signing  a  con- 
tract which  provides  that  the  stove  has  been  merely  leased  to  Mahoney,  the 
title  remaining  in  Fisher  until  the  whole  purchase  price  of  $40  is  paid. 
Mahoney  at  once  sells  the  stove  to  Burns,  who  gives  him  $20  for  it,  be- 
lieving the  stove  belongs  to  Mahoney.    Can  Fisher  take  the  stove  from  Burns? 

31.  If  the  above  transaction  takes  place  in  a  state  requiring  conditional 
contracts  to  be  filed,  and  the  above  contract  is  not  filed,  who  is  entitled  to 
the  stove? 

32.  The  above  stove  is  sent  to  Mahoney  by  Fisher  for  trial,  to  be  re- 
turned if  not  found  satisfactory,  no  specified  time  within  which  it  must  be 
returned  being  given.  Mahoney  keeps  the  stove  a  year  without  offering  to 
return  it  and  then,  when  a  bill  is  presented  for  the  stove,  he  says  that  it  is  not 
satisfactory  and  offers  to  bring  it  back.  Has  the  sale  been  completed,  and 
can  Mahoney  be  compelled  to  pay? 

33.  Define  chattel  mortgage. 

34.  In  the  case  of  a  chattel  mortgage,  who  is  entitled  to  the  possession 
of  the  property,  the  mortgagor  or  the  mortgagee? 

35.  If  the  mortgagor  makes  default  in  payment,  what  must  the  mortgagee 
do  to  obtain  absolute  title  to  the  chattel? 


SALES  OF  PERSONAL  PROPERTY  II5 

36.  What  is  a  warranty?    Does  it  differ  from  a  condition?    If  so,  how? 

37.  What  different  classes  of  warranty  are  there  ? 

38.  Coon,  a  sewing-machine  agent,  sells  a  machine  to  Mrs.  Randall,  telling 
her  that  it  is  the  best  machine  on  the  market,  and  that  it  runs  so  easily  that  it 
will  nearly  run  alone.  She  finds  out  that  the  machine  is  of  inferior  quality, 
runs  hard,  and  does  not  work  well,  so  seeks  to  recover  damages  for  breach  of 
warranty.     Does  the  representation  constitute  a  warranty? 

39.  Is  a  representation  that  a  horse  is  sound  and  fourteen  years  old  a 
warranty? 

40.  A  sold  a  team  of  horses  to  B.  He  was  driving  the  horses  when  the 
sale  took  place  and  immediately  delivered  them  over.  It  was  found  after- 
wards that  the  horses  did  not  belong  to  him,  and  an  action  was  brought 
against  him  for  breach  of  warranty.     Was  there  any  warranty?     If  so,  what? 

41 .  Suppose  at  the  time  A  sold  the  horses  he  did  not  have  them  in  his  pos- 
session, but  stated  that  they  were  in  C's  livery  stable.  B  brought  an  action 
against  him  for  breach  of  warranty.     Was  there  any  warranty?     If  so,  what? 

42.  Frank  sold  a  car  load  of  apples  to  Jeffreys,  nothing  being  said  as  to 
their  quality.  They  were  in  the  possession  of  Frank  at  the  time  they  were 
sold,  and  each  party  had  an  opportunity  to  inspect  them.  It  was  found  that 
they  were  of  an  inferior  grade,  and  Jeffreys  sued  for  damages  for  breach  of  an 
implied  warranty  of  quality.     Could  he  recover?     What  rule  would  apply? 

43.  X  contracted  to  make  for  Y  a  new  improved  hayrack.  When  Y 
received  it  he  found  that  it  was  not  suitable  for  the  purpose  for  which  it  was 
purchased  and  would  not  remain  in  position  on  the  wagon.  Was  there  any 
implied  warranty  on  the  part  of  X  ? 

44.  Meyer  purchased  a  quantity  of  cloth  from  Scott.  The  order  was  taken 
from  a  sample  which  Scott  carried  with  him.  When  the  cloth  was  received  it 
was  an  entirely  different  quality,  being  much  lighter  in  weight.  Meyer  sued 
for  damages  on  an  implied  warranty  that  the  cloth  was  to  be  like  the  sample. 
Was  there  such  an  implied  warranty  and  could  he  recover? 

45.  A  sold  B  100  barrels  of  sugar  to  be  delivered  in  30  days.  When  the 
time  for  delivery  arrived,  B  refused  to  accept  the  sugar  or  pay  the  purchase 
price.     Wliat  three  remedies  had  A? 

46.  If  the  sugar  had  been  delivered  and  accepted  by  B,  but  B  had  refused 
to  pay  for  it,  what  remedies  had  A  ? 

47.  If  A  resides  in  New  York  and  B  in  Rochester,  and  B  becomes  bankrupt 
after  the  sugar  has  been  shipped  by  A  but  before  it  reaches  Rochester,  what 
special  remedy  has  A? 

48.  If  the  goods  had  reached  Rochester  and  had  been  delivered  to  B,  but 
had  not  yet  been  disposed  of  and  had  been  still  in  his  possession,  would  A 
have  had  the  same  special  remedy? 

49.  If,  in  question  45,  B  had  been  ready  to  receive  the  sugar  but  A  had 
refused  to  deliver  it,  what  damages  could  B  have  recovered? 

50.  What  is  specific  performance,  and  when  is  it  granted  by  the  court? 


NEGOTIABLE    INSTRUMENTS 
I.     IN   GENERAL 

Definition.  —  A  negotiable  instrument  may  be  defined  as  a 
written  instrument  or  evidence  of  debt  which  may  be  transferred 
from  one  person  to  another  by  indorsement  or  deUvery  so  that 
the  legal  title  becomes  vested  in  the  transferee.  The  principal 
forms  of  negotiable  instruments  are  promissory  notes,  bills  of 
exchange,  and  checks. 

Negotiable  instruments  are  an  important  factor  in  business 
transactions  of  the  present  day,  passing  from  hand  to  hand,  in 
a  sense,  as  a  substitute  for  money.  As  a  means  of  transferring 
funds  and  paying  debts  the  check  is  as  common  among  business 
houses  as  the  money  itself,  while  the  promissory  note  is  an 
equally  important  factor  of  our  business  system.  The  note  is 
taken  to  the  bank  when  the  borrower  desires  money  advanced 
to  him  by  that  institution.  It  is  given  to  close  a  business  trans- 
action when  the  date  of  payment  is  a  day  in  the  future,  and  as  a 
large  part  of  the  business  of  to-day  is  transacted  on  credit,  we 
can  see  the  great  usefulness  of  the  promissory  note  as  a  trans- 
ferable evidence  of  debt. 

The  term  "  negotiable  "  is  applied  to  these  instruments  because 
they  pass  freely  from  hand  to  hand,  they  by  their  terms  pro- 
viding for  such  transfer. 

Basis  of  Negotiable  Instrument  Law.  —  It  is  a  common  state- 
ment that  the  negotiable  instrument  law  is  based  upon,  and 
derived  from,  the  customs  of  merchants.  In  the  early  law  there 
is  but  little  mention  of  commercial  questions,  any  dispute  arising 
between  merchants  and  customers  having  been  decided  on  the 
spot  by  a  special  court  or  committee  that  sat  to  administer  speedy 
justice  to  the  merchants  at  the  markets  or  great  fairs.     These 

ii6 


IN  GENERAL  H^ 

markets  or  fairs  were  held  from  time  to  time  in  the  different 
cities  in  which  the  mercantile  pursuits  were  largely  carried  on 
by  merchants  of  different  nations.  These  disputes  were  not 
determined  by  any  fixed  law  but  by  the  customs  of  the  mer- 
chants. In  the  old  English  law  books  it  was  said  that  justice 
was  administered  "  while  the  dust  fell  from  the  feet,"  so  quickly 
was  the  court  supposed  to  act.  This  practice  finally  developed 
into  certain  rules  which  were  taken  up  and  enforced  by  the 
courts  and  became  the  basis  of  our  mercantile  laws. 

As  the  merchants  dealt  between  different  countries,  it  is  easy  to 
understand  that  the  customs  of  the  different  nations  came  to  be 
much  the  same,  and  the  laws  founded  upon  these  customs  had 
much  similarity.  The  result  is  therefore  that  the  negotiable 
instrument  law,  which  is  based  more  directly  upon  these  customs 
than  is  any  other  branch  of  the  law,  does  not  materially  vary  in 
the  different  jurisdictions. 

Statute  Law.  —  It  is  very  important  that  contracts  which  are 
to  pass  from  hand  to  hand  and  from  state  to  state  with  almost 
the  freedom  of  money  should  be  subject  to  practically  the  same 
laws  and  rules,  and  to  this  end  a  statute  law  covering  the 
principal  questions  concerning  negotiable  instruments  has  been 
adopted  in  many  of  the  states,  giving  a  uniformity  that  renders 
these  instruments  more  freely  negotiable  than  they  would  other- 
wise be.  We  speak  of  negotiable  instruments  as  contracts,  and 
in  reality  they  are  written  contracts,  possessing  special  charac- 
teristics which  give  them  privileges  and  qualities  different  from 
those  in  ordinary  contracts. 

Principal  Characteristic. — The  principal  characteristic  of  a 
negotiable  instrument,  and  that  which  makes  it  pass  freely  as  a 
substitute  for  money,  is  that  in  the  hands  of  a  third  party  who 
purchases  it  in  good  faith  and  for  value  before  it  is  due,  it  is 
enforceable,  while  the  original  holder,  perhaps,  could  not  enforce 
it  for  the  reason  that  the  party  who  made  the  instrument  has  a 
good  defense  or  counterclaim.  As  soon,  however,  as  an  innocent 
purchaser  comes  into  possession  of  it  for  value  he  can  not  be 
prevented  from  collecting  because  of  any  defenses  existing 
between  the  original  parties.     In  other  contracts  the  purchaser 


Il8  NEGOTIABLE  INSTRUMENTS 

acquires  only  the  right  of  the  party  from  whom  he  buys,  but 
in  the  case  of  negotiable  paper  he  may  acquire  a  better  title 
than  the  original  holder. 

Essential  Conditions.  —  The  question  arises  as  to  what  condi- 
tions are  essential  to  constitute  a  contract  a  negotiable  instru- 
ment. In  general  we  find  that  no  exact  form  need  be  followed, 
although  custom  has  prescribed  forms  that  are  very  generally 
used,  but  it  is  required  that  a  negotiable  instrument  must  be  in 
writing,  properly  signed,  negotiable  in  form,  payable  in  money 
only,  the  amount  must  be  certain,  must  be  payable  absolutely,  to 
a  designated  payee,  at  a  time  that  is  certain. 

The  Instrument  must  be  in  Writing. — ^The  first  requirement 
by  the  custom  of  merchants  is  that  the  instrument  be  in  writing. 
No  oral  contract  could  be  negotiable.  By  a  written  contract  we 
mean  one  in  either  writing  or  printing,  and  the  writing  may  be 
executed  with  any  substance,  as  ink  or  pencil. 

Geary  v.  Physic,  5  B.  &  C.  (Eng.)  234,  was  an  action  on  a  promissory  note. 
The  defense  was  that  the  indorsement  to  plaintiff  was  made  in  lead  pencil  and 
that  such  indorsement  was  not  within  the  term  "  writing"  as  required  by  the  law 
and  custom  of  merchants.  The  court  held,  that  the  writing  was  sufficient. 
When  the  law  requires  an  instrument  to  be  written  it  does  not  require  the 
writing  to  be  in  any  particular  mode  or  to  be  done  with  any  particular  material. 

The  whole  instrument  must  be  written.  No  essential  part,  as 
the  names  of  the  parties,  the  amount,  or  the  date  can  be  omitted 
from  the  writing. 

In  Currier  v.  Lockwood,  40  Conn.  349,  it  was  held  that  the  following  instru- 
ment was  not  a  promissory  note, 

"$17.14.  Bridgeport,  Conn.,  Jan.  22,  1863. 

"  Due  Currier  &  Barker  seventeen  dollars  and  fourteen  cents,  value  received. 

"  Frederick  Lockwood." 

This  is  merely  a  due  bill.  It  does  not  contain  a  promise  to  pay. 
A  bare  acknowledgment  of  a  debt  does  not  in  legal  construction 
import  an  express  promise  to  pay. 

The  Instrument  must  be  signed  by  the  Party  executing  It.  — 
It  is  usual  that  the  signature  be  made  by  writing  the  name  of 
the  signer,  but  it  is  not  necessary,  as  he  may  affix  his  mark 
or  any  other  character  intended  to  be  a  signature. 


IN  GENERAL 


119 


In  Brown  v  Butchers'  &*  Drovers'  Bank,  6  Hill  (N.Y.)  443,  the  bank  sued 
Brown  as  the  indorser  of  a  bill  of  exchange.  The  indorsement  was  made 
with  a  lead  pencil  and  in  figures,  thus,  "  i.  2.  8.,"  no  name  being  written.  It 
was  known  that  they  were  in  Brown's  handwriting  and  that  he  meant  them  as 
his  indorsement.  It  also  appeared  that  he  could  write.  The  court  charged 
the  jury  that  if  they  believed  the  figures  were  made  by  Brown  as  a  substitute 
for  his  proper  name  with  the  intention  of  binding  himself  as  indorser,  he  was 
liable.  The  judgment  was  for  the  plaintiff.  This  was  held  to  be  correct.  A 
person  may  be  bound  by  any  mark  or  designation  he  thinks  proper  to  adopt, 
provided  he  uses  it  as  a  substitute  for  his  name,  and  intends  to  bind  himself. 

It  is  usual  to  place  the  signature  at  the  close  of  the  instrument, 
but  if  it  is  shown  that  it  is  meant  for  a  signature,  it  may  be  placed 
on  any  other  part. 

Taylor  v.  Dobbins,  i  Strange  (Eng.)  399,  is  an  English  case  decided  in 
1720  which  holds  that  it  is  sufficient  if  the  maker  writes  the  note  with  his  own 
hand,  and  there  need  be  no  subscription  in  that  case,  for  it  is  sufficient  if  his 
name  is  in  any  part  of  it.  "  I,  J.  S.,  promise  to  pay,  is  as  good  as  I  promise 
to  pay,  subscribed,  J.  S." 

The  Instrument  must  be  Negotiable  in  Form.  — The  instrument 
must  be  payable  to  "  Order  "  or  "  Bearer."  If  made  payable  to 
a  particular  person  or  persons  only,  it  is  not  a  negotiable  instru- 
ment, and  falls  under  the  rules  governing  a  simple  contract. 
In  other  words,  the  intent  of  the  party  making  the  instrument 
to  execute  a  negotiable  paper  must  appear  by  some  express 
words  showing  such  a  purpose. 

Chamberlain  v.  Young,  1893,  2  Q.  B.  (Eng.)  206,  was  an  action  on  the  fol- 
lowing instrument :  — 

"Five  months  after  date  pay  to order,  the 

sum  of  one  hundred  and  fifty  pounds,  for  value  received. 

(Signed)  *'E.  Malcolm  Tower. 

«To  Mr.  A.  J.  Young." 

The  defense  claimed  it  was  not  a  bill  of  exchange.  The  court  held  that  it 
was  a  bill  of  exchange  payable  to  order,  and  was  valid.  It  virtually  said  pay 
to  the  order  of  the  drawer. 

The  Instrument  must  be  Payable  in  Money,  and  the  Amount 
must  be  Definite  and  Certain.  — The  very  reason  it  must  be  pay- 
able in  money  is  that  if  it  were  payable  in  any  other  commod- 
ity the  amount  could  not  be  deiinite  and  certain.     If  payable  in 


I20  NEGOTIABLE  INSTRUMENTS 

a  given  number  of  bushels  of  wheat,  the  person  taking  it  would 
be  obliged  to  determine  the  value  of  wheat  at  that  place ;  the 
value  at  another  place  might  be  materially  different.  By  the 
term  "money"  is  meant  the  legal  tender  of  the  country;  that 
is,  a  note  payable  in  Spanish  money  is  not  a  negotiable  instru- 
ment in  the  United  States.     (See  "  Legal  Tender,"  page  G^.) 

Thompson  v.  Sloan,  23  Wend.  (N.Y.)  71,  was  a  suit  on  a  note  made  and 
dated  at  Buffalo,  N.Y.,  for  $2500,  payable  twelve  months  after  date  at  the 
Commercial  Bank  of  Buffalo,  N.Y.,  in  Canadian  money.  Held,  that  it  was 
not  a  negotiable  note.  A  promissory  note,  in  order  to  be  negotiable  within 
the  meaning  of  the  law  merchant,  must  be  payable  in  current  money  and  not 
in  the  money  of  some  other  country. 

The  sum  payable  is  considered  fixed  and  certain  if  it  is  a  given 
amount  with  interest,  or  payable  by  stated  installments  or  with 
exchange  (the  bank's  charges),  or  with  the  costs  of  collection  in 
case  payment  is  not  made  at  maturity. 

Dodge  V.  Emerson,  34  Me.  96,  was  an  action  on  a  note  "  payable  to  the 
Protection  Insurance  Co.,  or  order,  for  $271.25,  with  such  additional  premium 
as  may  arise  on  policy  No.  50,  issued  at  the  Calais  Agency."  Held,  that  the 
instrument  was  not  a  promissory  note,  the  amount  payable  being  indefinite 
and  uncertain. 

Lent  V.  Hodgman,  15  Barb.  (N.Y.)  274,  held,  an  instrument  not  negoti- 
able as  uncertain  which  provided  as  follows :  "  Pay  A.  B.  for  68  bushels  of 
wheat  in  store,  at  3  cents  below  first  quality  wheat." 

In  Fralick  v.  N'orton,  2  Mich.  130,  a  note  for  $60,  but  $ro  if  paid  by  Janu- 
ary I,  was  held  not  negotiable,  as  uncertain. 

In  Parsons  v.  Jackson,  99  U.S.  434,  certain  bonds  certified  "  that  the  Vicks- 
burg,  Shreveport  &  Texas  Railroad  Co.  are  indebted  to  John  Ray,  or  bearer, 
for  value  received,  in  the  sum  of  either  ^225  sterling  or  $1000  lawfiil  money 
of  the  United  States  of  America ;  to  wit,  ^225  sterling  if  the  principal  and 
interest  are  payable  in  J^ondon,  and  $1000  lawful  money  of  the  United  States 
of  America  if  the  principal  and  interest  are  payable  in  New  York  or  New  Or- 
leans." Held,  that  in  the  absence  of  an  express  designation  as  to  the  place 
where  the  bonds  were  to  be  paid,  the  instalments  were  not  negotiable,  as  the 
amount  to  be  paid  was  uncertain.  The  judge  said, "  One  of  the  first  rules  in  re- 
gard to  negotiable  paper  is  tliat  the  amount  to  be  paid  must  be  certain,  and 
not  be  made  to  depend  on  a  contingency." 

In  a  Negotiable  Instrument  there  must  be  a  Designated  Payee. 
—  There  must  be  no  uncertainty  as  to  the  person  to  whom  the 


IN  GENERAL  12 1 

money  is  to  be  paid.  The  instrument  must  be  made  payable  to 
a  certain  person,  or  his  order,  or  to  the  bearer.  It  need  not 
name  the  payee,  but  it  must  be  payable  to  a  person  or  persons 
who  can  be  definitely  ascertained  at  the  time  of  payment.  If 
payable  to  A  or  B,  it  is  not  a  negotiable  instrument  under  the 
law  merchant,  but  it  has  been  so  rendered  by  statute  in  some 
states. 

Mcintosh  V.  Lytle,  26  Minn.  336,  was  an  action  on  a  written  instrument 
drawn  as  follows :  — 

"$200.  St.  Paul,  Minn.,  Jan.  22,  1879. 

"  Dawson  &  Co.,  Bankers.  Pay  to  the  order  of,  on  sight,  two  hundred  dol- 
lars in  current  funds.  «  £   Lytle  " 

Held,  that  it  was  not  a  negotiable  instrument,  as  it  did  not  designate  the 
payee. 

Shaiv  V.  Smith,  150  Mass.  166,  was  an  action  by  the  administrator  of  the 
estate  of  Y.  B.  Bridgman  on  the  following  instrument:  — 

"$126.  Belchertown,  July  19,  1873. 

"  For  value  received  I  promise  to  pay  F.  B.  Bridgman's  estate,  or  order,  one 
hundred  twenty-six  dollars  on  demand,  with  interest  annually. 

"  Eugene  Bridgman." 

It  was  contended  that  this  was  not  a  promissory  note  because  there  was  no 
definite  payee,  but  the  court  held  that,  as  the  promise  was  to  pay  F.  B.  Bridg- 
man's  estate  and  he  was  dead  and  administrators  had  been  appointed,  the 
payees  were  in  existence  and  ascertainable.  They  were  therefore  designated 
with  sufficient  definiteness,  and  the  instrument  was  negotiable. 

Musselman  v.  Oakes,  19  III.  81,  was  an  action  upon  an  instrument  purport- 
ing to  be  a  promissory  note,  payable  to  "Olive  Fletcher  or  R.  H.  Oakes." 
Held,  the  instrument  was  not  negotiable,  as  it  was  not  payable  to  a  certain 
person.  This  was  payable  to  Fletcher  or  Oakes,  but  to  which  it  was  not 
certain. 

Nflxon  V.  Smith,  127  Mass.  485,  was  an  action  on  a  note  payable  to  "the 
Trustees  of  the  Methodist  Episcopal  Church  or  their  Collector."  Held,  to  be 
a  promissory  note,  as  it  was  not  payable  to  different  persons  in  the  alternative 
but  to  a  certain  designated  payee,  the  tmstees  of  the  church,  their  collector 
being  but  their  agent  and  payment  to  him  would  be  payment  to  them. 

The  Instrument  must  be  Payable  absolutely  and  Uncondition- 
ally.—  If  the  instrument  is  so  drawn  that  any  condition  may 
arise  which  would  render  it  of  no  effect,  it  is  not  a  negotiable 


I20  NEGOTIABLE  INSTRUMENTS 

a  given  number  of  bushels  of  wheat,  the  person  taking  it  would 
be  obliged  to  determine  the  value  of  wheat  at  that  place ;  the 
value  at  another  place  might  be  materially  different.  By  the 
term  "money"  is  meant  the  legal  tender  of  the  country;  that 
is,  a  note  payable  in  Spanish  money  is  not  a  negotiable  instru- 
ment in  the  United  States.     (See  "  Legal  Tender,"  page  6'}^.^ 

Thompson  v.  Sloan,  23  Wend.  (N.Y.)  71,  was  a  suit  on  a  note  made  and 
dated  at  Buffalo,  N.Y.,  for  $2500,  payable  twelve  months  after  date  at  the 
Commercial  Bank  of  Buffalo,  N.Y.,  in  Canadian  money.  Held,  that  it  was 
not  a  negotiable  note.  A  promissory  note,  in  order  to  be  negotiable  within 
the  meaning  of  the  law  merchant,  must  be  payable  in  current  money  and  not 
in  the  money  of  some  other  country. 

The  sum  payable  is  considered  fixed  and  certain  if  it  is  a  given 
amount  with  interest,  or  payable  by  stated  installments  or  with 
exchange  (the  bank's  charges),  or  with  the  costs  of  collection  in 
case  payment  is  not  made  at  maturity. 

Dodge  V.  Emerson,  34  Me.  96,  was  an  action  on  a  note  "  payable  to  the 
Protection  Insurance  Co.,  or  order,  for  $271.25,  with  such  additional  premium 
as  may  arise  on  policy  No.  50,  issued  at  the  Calais  Agency."  Held,  that  the 
instrument  was  not  a  promissory  note,  the  amount  payable  being  indefinite 
and  uncertain. 

Lent  V.  Hodgman,  15  Barb.  (N.Y.)  274,  held,  an  instrument  not  negoti- 
able as  uncertain  which  provided  as  follows :  "  Pay  A.  B.  for  68  bushels  of 
wheat  in  store,  at  3  cents  below  first  quality  wheat." 

In  Fralick  v.  Norton,  2  Mich.  130,  a  note  for  $60,  but  $50  if  paid  by  Janu- 
ary I,  was  held  not  negotiable,  as  uncertain. 

In  Parsons  v.  Jackson,  99  U.S.  434,  certain  bonds  certified  "  that  the  Vicks- 
burg,  Shreveport  &  Texas  Railroad  Co.  are  indebted  to  John  Ray,  or  bearer, 
for  value  received,  in  the  sum  of  either  ^225  sterling  or  $1000  lawflil  money 
of  the  United  States  of  America ;  to  wit,  ^225  sterling  if  the  principal  and 
interest  are  payable  in  J^ondon,  and  $1000  lawful  money  of  the  United  States 
of  America  if  the  principal  and  interest  are  payable  in  New  York  or  New  Or- 
leans." Held,  that  in  the  absence  of  an  express  designation  as  to  the  place 
where  the  bonds  were  to  be  paid,  the  instruments  were  not  negotiable,  as  the 
amount  to  be  paid  was  uncertain.  The  judge  said,  "  One  of  the  first  rules  in  re- 
gard to  negotiable  paper  is  that  the  amount  to  be  paid  must  be  certain,  and 
not  be  made  to  depend  on  a  contingency." 

In  a  Negotiable  Instrument  there  must  be  a  Designated  Payee. 

—  There  must  be  no  uncertainty  as  to  the  person  to  whom  the 


IN  GENERAL  j2i 

money  is  to  be  paid.  The  instrument  must  be  made  payable  to 
a  certain  person,  or  his  order,  or  to  the  bearer.  It  need  not 
name  the  payee,  but  it  must  be  payable  to  a  person  or  persons 
who  can  be  definitely  ascertained  at  the  time  of  payment.  If 
payable  to  A  or  B,  it  is  not  a  negotiable  instrument  under  the 
law  merchant,  but  it  has  been  so  rendered  by  statute  in  some 
states. 

Mcintosh  V.  Lytle,  26  Minn,  336,  was  an  action  on  a  written  instrument 
drawn  as  follows :  — 

"$200.  St.  Paul,  Minn.,  Jan.  22,  1879. 

"  Dawson  &  Co.,  Bankers.  Pay  to  the  order  of,  on  sight,  two  hundred  dol- 
lars in  current  funds.  <<  £   Lytle." 

Held,  that  it  was  not  a  negotiable  instrument,  as  it  did  not  designate  the 
payee. 

Shawv.  Smith,  150  Mass.  166,  was  an  action  by  the  administrator  of  the 
estate  of  Y.  B.  Bridgman  on  the  following  instrument:  — 

"$126.  Belchertown,  July  19,  1873. 

"  For  value  received  I  promise  to  pay  F.  B.  Bridgman's  estate,  or  order,  one 
hundred  twenty-six  dollars  on  demand,  with  interest  annually. 

"  Eugene  Bridgman." 

It  was  contended  that  this  was  not  a  promissory  note  because  there  was  no 
definite  payee,  but  the  court  held  that,  as  the  promise  was  to  pay  F.  B.  Bridg- 
man's estate  and  he  was  dead  and  administrators  had  been  appointed,  the 
paj'ees  were  in  existence  and  ascertainable.  They  were  therefore  designated 
with  sufficient  definiteness,  and  the  instrument  was  negotiable. 

Mussehfian  v.  Oakes,  19  111.  81,  was  an  action  upon  an  instrument  purport- 
ing to  be  a  promissory  note,  payable  to  "Olive  Fletcher  or  R.  H.  Oakes." 
Held,  the  instrument  was  not  negotiable,  as  it  was  not  payable  to  a  certain 
person.  This  was  payable  to  Fletcher  or  Oakes,  but  to  which  it  was  not 
certain. 

Noxon  V.  Smith,  127  Mass.  485,  was  an  action  on  a  note  payable  to  "the 
Trustees  of  the  Methodist  Episcopal  Church  or  their  Collector."  Held,  to  be 
a  promissory  note,  as  it  was  not  payable  to  different  persons  in  the  alternative 
but  to  a  certain  designated  payee,  the  trustees  of  the  church,  their  collector 
being  but  their  agent  and  payment  to  him  would  be  payment  to  them. 

The  Instrument  must  be  Payable  absolutely  and  Uncondition- 
ally.—  If  the  instrument  is  so  drawn  that  any  condition  may 
arise  which  would  render  it  of  no  effect,  it  is  not  a  negotiable 


122  NEGOTIABLE  INSTRUMENTS 

paper.  Consequently,  a  promise  to  pay  a  certain  sum  out  of 
a  designated  fund  is  not  negotiable,  and  this  is  the  case  even 
though  the  fund  exists  at  the  time  or  the  condition  that  would 
nullify  the  contract  never  arises. 

In  Richardson  v.  Carpenter,  46  N.Y.  660,  an  instrument  in  the  following 
form  was  held  not  to  be  a  negotiable  instrument,  as  the  money  was  payable 
out  of  a  particular  fund.  "  Please  pay  A,  or  order,  $500  for  value  received  out 
of  the  proceeds  of  the  claim  against  the  Peabody  Estate,  now  in  your  hands 
for  collection,  when  the  same  shall  have  been  collected  by  you." 

Blake  V.  Coleman,  22  Wis.  415,  was  an  action  on  a  promissory  note  in  the 
usual  form,  on  the  back  of  which  was  indorsed,  "  The  conditions  of  the  within 
note  are  as  follows :  L.  S.  Blake  or  bearer  is  not  to  ask  or  expect  payment  of 
said  note  until  his,  Coleman's,  old  mill  is  sold  for  a  fair  price."  It  was  shown 
that  this  indorsement  was  made  at  the  time  the  note  was  given.  The  note 
was  given  for  a  new  fanning  mill,  and  the  defendant  still  had  his  old  one  on 
hand.  Held,  that  this  indorsement  qualified  the  note  and  made  it  a  mere 
agreement,  and  not  being  a  negotiable  instrument  it  could  not  be  collected 
upon  until  the  agreement  was  fulfilled. 

Worden  v.  Dodge,  4  Denio  (N.Y.)  159,  was  an  action  on  an  agreement  in 
which  defendants  promised  to  pay  to  plaintiiT  or  order  $250  with  interest, 
payable  one  half  in  two  years  and  the  other  half  in  three  years  "  out  of  the  net 
proceeds,  after  paying  the  cost  and  expenses,  of  ore  to  be  raised  and  sold  from 
the  bed  on  the  lot  this  day  conveyed  by  Edward  Madden  and  Edwin  Dodge, 
which  bed  is  to  be  opened  and  the  ore  disposed  of  as  soon  as  conveniently 
may  be."  Held,  that  the  payment  of  the  amount  depended  on  a  contingency, 
so  the  agreement  was  not  a  promissory  note.  A  promissory  note  must  be 
payable  absolutely  and  not  dependent  upon  some  contingency  or  event.  Here 
the  fund  might  not  be  adequate. 

But  the  promise  is  not  made  conditional  by  designating  a 
place  of  payment  in  the  instrument. 

Not  only  must  the  amount  be  payable  absolutely,  but  the 
time  of  payment  must  be  definite  and  fixed.  That  is,  the  date 
of  payment  must  be  definitely  stated,  or  it  must  be  on  or  before 
a  certain  definite  date,  or  at  a  certain  time  after  the  happen- 
ing of  an  event  that  is  sure  to  occur.  A  note  payable  a  certain 
number  of  days  after  the  death  of  a  person  is  negotiable,  the 
date  being  certain  because  the  time  is  sure  to  arrive. 

Shaw  V.  Camp,  160  111.  425,  held,  that  the  following  was  a  negotiable  in- 
Struraent,  as  the  meaning  was  that  it  should  be  payable  after  the  death  of  the 


PROMISSORY  NOTES 


123 


maker.    «  After  my  death  date  I  promise  to  pay  Hanson  Camp  or  order  the 
sum  of  $750  without  interest." 

But  the  contingent  event  must  be  certain  to  occur  or  the 
promise  will  not  be  absolute. 

Kelley  v.  Hemmingway^  13  111.  604,  was  an  action  on  an  instrument  in  the 
following  form :  — 

**Castleton,  April  27,  1844. 

"  Due  Henry  D.  Kelley  fifty-three  dollars,  when  he  is  twenty-one  years  old, 
with  interest."  "David  Kelley." 

Plaintiff  proved  that  Henry  D.  Kelley  became  of  age  before  the  action  was 
commenced.  The  court  held  that  the  instrument  was  not  negotiable,  as  pay- 
ment was  contingent  on  an  event  that  might  or  might  not  happen.  The 
money  was  therefore  not  payable  "absolutely  and  at  all  events,"  and  the 
paper  lacked  one  of  the  necessary  elements  of  a  negotiable  instrument. 

Duffield  \ .  Johnston,  96  N.Y.  369,  was  an  action  brought  to  recover  the 
last  two  payments  on  the  following  instrument :  — 

"Thomas  Johnston,  Esq.  : 

^'■Dear  Sir:  (i)  Please  pay  to  J.  J.  Duffield,  or  order,  the  sum  of 
six  hundred  and  sixty-six  dollars  when  the  brown  stone  work  of  your  eight 
houses  situated  on  the  south  side  of  East  One  Hundred  and  Fifth  Street, 
between  Second  and  Third  Avenues,  City,  is  topped  out. 

"  (2)  The  sum  of  four  hundred  dollars  when  the  stoops  of  said  eight 
houses  are  set. 

"  (3)  The  sum  of  three  hundred  and  seventy-five  dollars  when  the  brown 
stone  work  of  the  said  eight  houses  is  completed ;  and  charge  the  same  to 
me,  and  oblige,  yours,  etc., 

"Wm.  Chave." 

Held,  that  it  was  not  a  bill  of  exchange  because  not  payable  absolutely.  It 
was  payable  only  upon  condition  that  the  work  should  be  done  as  specified, 
and  might  never  become  payable. 

The  law  simply  requires  that  the  time  of  payment  shall  be 
sure  to  arrive. 


2.     PROMISSORY  NOTES 

Definition.  —  A  promissory  note  is  an  unconditional  written 
promise  made  by  one  or  more  persons  to  pay  to  another  or  his 
order  or  bearer  a  certain  sum  of  monev  at  a  specified  time. 


t24  NEGOTIABLE  msTRL/MElVTS 

The  party  who  makes  the  note  and  whose  promise  is  con- 
tained therein  is  called  the  maker,  and  the  party  to  whom  the 
premise  is  made  is  called  Xho.  payee. 

Form.  —  There  is  no  exact  form  of  note  required  by  law ;  in 
ordinary  business  practice  it  is  printed  in  blank  and  filled  in. 
It  may  or  may  not  draw  interest,  but  will  not  unless  provided 
for  in  the  note.     The  following  form  is  a  common  one  : 


^(r/'-^/rf,      //f  .*\.t^f>^^<^^^^^^-^^ 


'§. 


j)^    /'  g«g- 


<^<C/<,^c^A^!<t.<^-*^ ^ 


If  the  note  is  without  interest  the  words  "  with  interest "  are 
omitted.  In  this  note  Dickson  is  the  maker  and  Strouss  is  the 
payee.  If  Strouss,  the  payee,  wishes  to  obtain  the  money  before 
the  note  matures,  he  indorses  it  by  writing  his  name  upon  the 
back,  and  he  is  then  also  called  the  indorser,  the  person  to 
whom  he  transfers  it  being  called  the  holder  or  indorsee. 

The  above  note  is  an  illustration  of  a  several  note,  as  there 
is  but  one  maker.  There  may  be  also  a  joint  note  and  a  joint 
and  several  note. 

In  a  joint  note  there  are  two  or  more  makers  and  the  obliga- 
tion to  pay  rests  upon  the  makers  jointly,  and  they  must  be 
sued  together;  if  one  is  released  the  other  or  others  can  not  be 
held. 

In  Khig  V.  Hoare,  13  M.  &  W.  (Eng.)  494,  it  was  held  that  a  judgment 
against  one  of  two  joint  debtors  is  a  bar  to  an  action  against  the  other  on  the 
same  debt. 

When  two  or  more  persons  make  a  note  and  agree  to  pay 
jointly  and  severally  the  form  is  substantially  as  follows :  — 


PROMISSORY  NOTES 


125 


JZ.  ./ygt<- 


A^Ai^y^iCy  EiU  Rhnr  Savinli  Baok 


Witness  SOr  J^ 


.A^ty/^ 


Upon  this  note  the  makers  may  be  sued  together  or  cither 
one  can  be  held  severally  for  the  full  amount. 

If  the  last  note  should  be  drawn  in  the  form  of  the  several 
note,  but  be  signed  by  Holden  and  also  by  one  or  more  sure- 
ties, it  would  be  construed  by  law  to  be  a  joint  and  several  note. 

Dart  V.  Sherwood,  7  Wis.  523,  was  an  action  against  the  signers  of  the 
following  promissory  note  as  joint  makers. 
"$400.  RiPON,  Wis.,  Nov.  4,  1856. 

"  Thirty  days  after  date,  for  value  received,  I  promise  to  pay  Putnam  C.  Dart, 
or  order,  four  hundred  dollars  with  interest,  at  the  rate  of  twelve  per  cent  per 
annum.  «J.  C.  Sherwood, 

"Wm.  C.  Sherwood,  Surety." 

Held,  by  the  court  to  be  a  joint  and  several  note ;  joint  because  signed  by 
both  parties  and  several  because  each  defendant  promised  severally. 

In  Ely  v.  Clute,  19  Hun  (N.Y.)  35,  the  following  note  was  held  to  be  joint 
and  several,  and  separate  judgments  might  be  rendered  against  the  two 
makers. 
«|27o.  Stockton,  March  14,  1875. 

"  One  day  after  date  I  promise  to  pay  Lorenzo  Ely,  or  bearer,  two  hundred 
and  seventy  dollars  at  the  post  office  in  Stockton.     Value  received  with  use. 

"Thomas  W.  Clute. 
«J.  B.  Clute." 

In  a  few  of  the  states  the  distinction  between  joint,  and  joint 
and  several  notes  has  been  abolished,  and  all  notes  signed  by 
two  or  more  parties  have  been  declared  to  be  joint  and  several. 

Signatures.  —  The  construction  of  a  signature  may  be  to  a 
certain  extent  ambiguous,  and  it  may  be  well  to  note  the  effect 


126  NEGOTIABLE  INSTRUMENTS 

of  a  signature  which  is  apparently  intended  to  be  made  by  an 
agent  or  attorney  to  bind  his  principal. 

It  is  plain  that  if  the  maker  or  any  other  party  signing  exe- 
cutes the  signature  in  any  of  the  following  forms,  the  principal 
alone  is  bound,  provided  of  course  the  agent  acts  within  his 
authority :  James  Lane  by  George  Chapman,  Agent ;  James 
Lane  by  his  agent,  George  Chapman ;  James  Lane  by  George 
Chapman ;  George  Chapman,  agent  for  James  Lane ;  or  George 
Chapman  for  James  Lane. 

Long  V.  Colburn,  1 1  Mass.  97,  was  a  case  which  held  that  the  signature 
"Pro  William  Gill  —  J.  S.  Colburn,"  on  a  promissory  note,  was  the  signature 
of  the  principal,  William  Gill,  and  that  he  was  bound  by  it. 

On  the  other  hand  we  find  the  courts  holding  that  the  agent 
alone  is  bound  by  such  signatures  as  the  following :  George 
Chapman,  Agent;  George  Chapman,  agent  of  James  Lane; 
George  Chapman,  president,  or  treasurer,  etc.,  or  George 
Chapman,  president  of  the  Genesee  Gas  Co. 

Davis  V.  England,  141  Mass.  587,  was  an  action  on  a  promissory  note  in 
the  form,  "  I  promise  to  pay,"  and  signed,  "  W.  H.  England,  President  and 
Treasurer  Chelsea  Iron  Foundry  Co."  Held,  that  the  signature  made  it  the 
note  of  England  and  not  of  the  company. 

McClellan  v.  Robe,  93  Ind.  298,  held,  a  note  in  the  usual  form  in  which 
several  persons  signed  and  after  their  names  added, "  trustees  of  the  G.  Lodge, 
etc.,"  rendered  the  signers  individually  liable,  the  words  added  being  but 
descriptive  of  the  parties. 

When  the  signature  to  the  instrument  is  made  by  the  agent 
writing  the  name  of  the  principal  followed  by  the  agent's  name, 
the  courts  differ  as  to  the  effect  given.  Such  a  signature  as 
James  Lane,  George  Chapman,  Agent,  or  Genesee  Gas  Co., 
George  Chapman,  President,  is  held  by  some  courts  to  be  the 
principal's  signature,  and  he  alone  is  bound. 

Liebscher  v.  Kraus,  74  Wis.  387,  was  an  action  brought  on  the  following 
promissory  note :  — 
"$637.40.  Milwaukee,  Jan.  i,  1887. 

"  Ninety  days  after  date  we  promise  to  pay  to  Leo  Liebscher,  or  order,  the 
sum  of  six  hundred  and  thirty-seven  dollars  and  forty  cents,  value  received. 

"San  Pedro  Mining  &  Milling  Co., 
«F.  Kraus,  President." 


PROMISSORY  NOTES  i^J 

Plaintiff  demanded  judgment  against  the  corporation  and  Kraus  as  joint 
makers.  The  couit  held  that  it  was  the  note  of  the  company  alone  and  that 
Kraus  signed  for  the  company  as  its  president.  The  signature  alone  showed 
plainly  enough  that  Kraus  was  acting  as  officer  or  agent  of  the  company. 

Other  courts  hold  that  it  is  the  signature  of  both  the  principal 
and  the  agent,  and  that  both  are  liable. 

Mathews  Or'  Co.  v.  Mattress  Co.,  87  Iowa  246,  was  an  action  on  a  promissory 
note  against  The  Dubuque  Mattress  Co.  and  John  Kapp.  The  note  read 
"  we  promise  to  pay  "  and  was  signed  "  Dubuque  Mattress  Co.,  John  Kapp, 
Pt."  Held,  that  Kapp  was  personally  liable.  Where  a  person  signs  a  note 
and  adds  thereto  his  name  of  office,  and  there  is  nothing  on  the  face  of  the 
instrument  to  show  he  does  not  intend  to  be  bound,  he  is  personally  liable, 
because  the  name  of  the  office  is  merely  descriptive  of  the  person. 

And  still  other  courts  hold  the  signature  to  be  ambiguous  and 
allow  evidence  to  explain  it. 

Bean  v.  Pioneer  Mining  Co.,  66  Cal.  451,  was  an  action  on  a  promissory 
note  reading  "we  promise  to  pay"  and  signed  "Pioneer  Mining  Company, 
John  E.  Mason,  Supt."  Held,  that  the  signature  was  ambiguous  and  parol  evi- 
dence was  admissible  to  show  that  it  was  understood  by  the  payee  to  be  the 
note  of  the  company,  and  that  the  consideration  for  which  it  was  given  passed 
to  the  company. 

The  body  of  the  instrument  may  contain  statements  that  will 
explain  the  instrument,  or  the  margin  or  heading  of  the  paper  may 
disclose  the  identity  of  the  principal  or  the  fact  of  the  agency. 

Casco  National  Bank  v.  Clark,  139  N.Y.  307,  was  an  action  against  Clark 
and  Clo?.e  on  the  following  promissory  note :  — 

A     "$7500.  Brooklyn,  N.Y,,  Aug.  2,  1890. 

8  "  Three  months  after  date,  we  promise  to  pay  to  the  order  of  Clark  and 

"S  Chaplin  Ice  Company,  seventy-five  hundred  dollars  at  Mechanics  Bank, 
%      value  received.  John  Clark,  Pres. 

2  "E.  H.  Close,  Treas." 

Defendants  claimed  that  they  had  signed  as  officers  of  the  Ridgewood  Ice 
Company  and  had  not  become  personally  liable  on  the  note.  But  the  court 
held  that  the  name  of  the  company  printed  on  the  margin  of  the  paper  did  not 
create  any  presumption  that  the  note  was  made  by  the  company,  and  that  the 
officers  of  the  company  had  a  right  to  obligate  themselves. 

Discharge.  —  The  agreement  of  the  maker  of  a  note  or  of  the 
acceptor  of  a  bill  of  exchange  is  that  upon  the  date  of  maturity 


128  NEGOTIABLE  INSTRUMENTS 

of  the  note  or  bill  he  will  pay  absolutely  the  amount  named 
therein  to  the  payee  designated  therein  or  to  his  order. 

His  promise  is  absolute,  and  it  can  be  discharged  only  in  some 
one  of  the  ways  in  which  a  contract  can  be  discharged,  as  by 
payment,  lapse  of  time,  etc. 

The  only  condition  he  can  require  is  that  the  holder  surrender 
the  note  or  bill,  and  the  maker  is  not  obhged  to  pay  without  re- 
ceiving the  instrument,  as  otherwise,  if  it  were  lost,  it  might  be 
presented  by  a  person  purchasing  of  the  finder,  and  so  payment 
might  be  compelled  the  second  time.  Relief  in  such  a  case  is 
generally  given  the  payee,  however,  by  compelling  the  maker  to 
pay  upon  being  furnished  a  bond  to  indemnify  him  against  any 
loss  because  of  the  reappearance  of  the  note. 

3.     BILLS   OF   EXCHANGE 

Definition.  —  A  bill  of  exchange,  or  draft,  is  a  written  order 
from  one  person  to  another  to  pay  to  a  third  party  or  his  order 
a  certain  amount  of  money  at  a  specified  time. 

A  common  form  of  a  bill  of  exchange  is :  — 


J^nertmn'iMo<>riy^(mtfumi^ 


/t^^. 


t.i^^> 


^^^^.^ c.  '-<^^-~Jj      y^— 


Simuiiitt 


In  this  bill  of  exchange  the  American  Book  Company  is  the 
drawer,  the  National  Park  Bank  is  the  payee,  and  Davis  is 
the  drawee.  After  Davis  has  accepted  the  bill  he  is  called 
the  acceptor. 

Bank  Draft. — When  the  drawer  and  drawee  are  banks  the 
bill  of  exchange  is  known  as  a  bank  draft  and  constitutes  a 


BILLS  OF  EXCHANGE  1 29 

common  method  of  paying  the  debts  of  parties  residing  in  dif- 
ferent localities.     The  form  is  as  follows  :  — 


Merchants  Bank  of  Rochester, 


To  The 

Chemical 


Pay  to  tne  order  of  \r^^^^V>-^-^'"^^-<^^^.^i^:--^/^,^^^^^^- H./^^K'" 


National  "B&tW^^ ^.         ^<=-<^ 
vYork  City.  -^^/^'.A:^'^ i  yC:Z, 


NewYork  City. 


Allen  owes  Brown  of  Albany  ;^ioo  and  wishes  to  pay  him, 
therefore  he  goes  to  his  bank  in  Rochester  and  purchases  a  draft 
on  a  New  York  bank  and  sends  it  to  Brown.  This  draft  he  has 
made  payable  to  himself  and  on  the  back  indorses  "  pay  to.  the 
order  of  William  Brown  "  and  signs  "  Charles  M.  Allen."  The 
draft  might  have  been  made  payable  to  Brown  on  its  face,  but  the 
advantage  of  the  other  form  is  that  when  the  draft  is  returned  to 
the  Merchants  Bank,  having  been  indorsed  by  Brown,  it  contains 
a  complete  record  of  the  transaction,  and  in  case  of  a  dispute  is 
a  receipt  which  Allen  could  procure  for  use  in  evidence.  The 
banks  have  an  arrangement  among  themselves  through  the  clear- 
ing, house  and  their  correspondents  in  the  large  financial  centers 
like  New  York  and  Chicago,  by  reason  of  which  they  can  issue 
these  drafts.  The  New  York  or  Chicago  draft  is  as  readily  ac- 
cepted as  the  money  itself,  and  is  unhesitatingly  cashed  by  banks 
anywhere.  Here  it  may  be  seen  how  the  bill  of  exchange  or  bank 
draft  acts  as  a  convenient  transfer  of  obligation  without  the 
necessity  of  conveying  money  between  distant  points. 

The  bill  of  exchange  and  promissory  note  like  the  bank  draft 
may  be  transferred  by  the  payee,  and  so  may  pass  from  hand 
to  hand,  and  thus  take  the  place  of  money. 

Bills  of  Exchange  may  be  either  Foreign  or  Inland.  —  A  foreign 
bill  of  exchange  is  a  bill  drawn  in  one  state  or  country  and  pay- 
able in  another.  An  inland  bill  of  exchange  is  one  drawn  and 
made  payable  in  the  same  state  or  country.     As  will  be  seen, 

COM.  LAW  —  9 


130 


NEGOTIABLE  INSTRUMENTS 


the  last  illustration  is  an  inland  bill-  A  foreign  bill  is  some- 
times drawn  in  duplicate  or  triplicate,  and  upon  the  payment  of 
one  the  other  or  others  become  void.  The  seveial  copies  are 
termed  a  set,  the  object  in  having  them  so  drawn  being  that  if 
one  is  lost,  the  other,  or  others,  will  reach  their  destination.  In 
the  earlier  times  the  custom  was  to  send  each  copy  by  a  different 
route,  thus  assuring  safety  and  dispatch.  The  first  copy  presented 
was  the  one  paid.     A  common  form  for  a  foreign  bill  is  :  — 


(^m^/M'/:^.^ay:^^:^:mkc^i^t^ 


But  the  custom  of  issuing  bills  in  a  set  is  fast  becoming  obso- 
lete, and  the  practice  between  the  states  is  to  draw  foreign  bills 
in  the  same  form  as  inland  bills. 

Time  and  Sight  Drafts.  —  Drafts  are  also  drawn  as  either  time 
or  sight  drafts.  The  following  is  a  sight  draft,  that  is,  it  is  pay- 
able on  presentation.  A  time  draft  is  one  payable  at  a  given 
time  after  demand  or  sight. 


%y/c/.  C^^^'yoC/^Qo^ 


'Joua/K) 


-.-^^^M^i^^ 


BILLS  OF  EXCHANGE  I31 

The  draft  is  a  common  means  employed  by  business  houses 
to  collect  debts  due  them  from  parties  residing  in  other  places. 
The  creditor  draws  upon  the  debtor,  naming  a  bank  as  the 
payee,  for  the  purpose  of  making  the  collection. 

Acceptance.  —  A  bill  of  exchange  being  an  order  on  the  drawee 
to  pay  a  certain  amount  of  money  to  a  third  party,  it  is  not 
binding  upon  the  drawee  until  he  has  accepted  it.  The  accept- 
ance is  signified,  if  a  sight  draft,  by  payment ;  if  a  time  draft, 
by  the  drawee  writing  the  word  "  accepted  "  across  the  face  of 
the  draft  and  signing  his  name.  After  he  has  accepted  the  bill, 
he  becomes  the  acceptor  and  his  obhgation  is  then  fixed  and 
absolute  and  can  be  enforced  against  him,  his  position  becoming 
much  the  same  as  that  of  the  maker  of  a  note.  According  to 
the  law  merchant,  the  acceptance  could  be  either  oral  or  written, 
but  by  statute  in  most  of  the  states  it  must  be  in  writing. 
Barring  the  case  of  an  acceptance  for  honor,  which  will  be  dis- 
cussed later,  the  only  person  who  can  accept  a  bill  is  the  drawee. 

In  Cook  V.  Baldwin,  120  Mass.  317,  it  was  held  that  the  words  "I  take 
notice  of  the  above,  Henry  Baldwin  "  written  on  a  bill  of  exchange  do  not 
necessarily  import  an  acceptance,  and  parol  evidence  of  a  refusal  can  be 
shown.  The  court  said  a  bill  of  exchange  may  be  accepted  by  an  oral  promise 
to  pay  as  well  as  by  a  written  one,  or  by  such  language  and  conduct  on  the  part 
of  the  drawee,  when  the  bill  is  presented  to  him,  as  justifies  the  payee  in  be- 
lieving that  he  consents  to  pay  it. 

National  Park  Bank  v.  Ninth  National  Bank,  46  N.Y.  "]"],  was  an  action 
to  recover  the  money  paid  on  a  forged  draft,  which  the  plaintiff  had 
accepted  and  paid.  The  court  held  that  the  plaintiff  could  not  recover.  It  is 
a  well-settled  rule  that  it  is  incumbent  upon  the  drawee  of  a  bill  to  be  satisfied 
that  the  signature  of  the  drawer  is  genuine,  and  he  is  presumed  to  know  the 
handwriting  of  such  drawer,  and  if  he  accepts  or  pays  a  bill  to  which  the  draw- 
er's name  has  been  forged,  he  is  bound  by  the  act  and  can  neither  repudiate 
the  acceptance  nor  recover  the  money  paid. 

The  Bill  must  be  presented  to  the  Drawee  for  Acceptance  or 
Payment.  —  Until  accepted  the  drawer  is  the  party  liable  to  the 
payee.  He  agrees  that  the  drawee  will  accept  it  or  he  him- 
self will  pay  it  if  proper  presentment  and  demand  be  made  upon 
the  drawee,  and  notice  of  dishonor  be  given  him.  If  the  bill  is 
payable  a  given  number  of  days  after  sight  or  demand  it  must 
iDe  presented  to  the  drawee  for  acceptance  at  maturity  by  the 


132  NEGOTIABLE  INSTRUMENTS 

holder.  If  the  drawee  refuses  to  accept,  the  drawer  must  be 
duly  notified  and  he  thereupon  becomes  liable  for  the  bill.  But 
if  the  bill  is  payable  a  certain  number  of  days  after  date  or  upon 
demand  or  upon  a  day  specified,  it  need  not  be  presented  for 
acceptance,  presentment  for  payment  being  sufficient.  Still  it 
may  be  presented  for  the  purpose  of  binding  the  drawee.  A 
bill  payable  at  sight  or  a  given  number  of  days  after  sight  must 
be  presented  for  acceptance  within  a  reasonable  time,  failure  to 
do  so  releasing  the  drawer.  Just  what  time  may  be  deemed 
reasonable  depends  upon  the  circumstances  of  the  case,  and  this 
does  not  prevent  the  circulation  of  the  bill  from  one  party  to 
another  before  presentment. 

In  Chambers  v.  Hill,  26  Tex.  472,  a  bill  of  exchange  dated  December  18, 
185 1,  was  not  presented  for  payment  until  two  years  and^nine  months  there- 
after. The  draft  contained  no  specific  date  for  payment.  Held,  that  the  draft 
was  payable  on  demand  and  must  be  presented  for  payment  within  a  reason- 
able time  to  hold  the  drawer  and  indorser ;  and  that  an  unexplained  delay  of 
two  years  and  nine  months  is  unreasonable  and  the  drawer  and  indorser  are 
released. 

In  Wallace  v.  Agry,  4  Mason  (U.S.)  336,  a  bill  drawn  June  18  at 
Havana,  Cuba,  on  Williams  in  London,  payable  sixty  days  after  sight  and  pre- 
sented in  London  on  October  31,  having  been  kept  by  the  holder  in  Boston 
from  July  6  to  September  29,  was  found  to  have  been  presented  within  a  rea- 
sonable time. 

Aymar  v.  Beers,  7  Cowen  (N.Y.)  705,  held,  that  a  bill  drawn  on  December 
12  in  New  York,  "three  days  after  sight,"  and  presented  January  10  in  Rich- 
mond, Va.,  having  been  in  the  payee's  hands  during  that  time,  was  presented 
within  a  reasonable  time  under  the  circumstances  of  the  case. 

When  the  drawee  refuses  to  accept,  the  bill  is  said  to  be 
dishonored. 

Acceptance  for  Honor.  —  Mention  has  been  made  of  acceptance 
for  honor.  This  is  also  known  as  acceptance  supra  protest. 
When  the  bill  has  been  dishonored  and  protested,  a  third  party 
who  may  or  may  not  be  the  drawer  accepts  it  to  protect  the 
drawer  or  any  of  the  other  parties  to  the  instrument.  The  obli- 
gation of  such  an  acceptor  is  to  pay  the  bill  if  upon  a  further 
presentation  of  it  to  the  drawee  for  payment,  at  maturity,  it  is 
again  dishonored  and  duly  protested,  and  due  notice  is  given  to 
such  acceptor. 


CHECJCS  I XX 

Virtual  Acceptance.  —  There  is  another  mode  of  acceptance 
known  as  "virtual"  acceptance,  which  is  practically  a  promise 
to  accept.  .  If  the  virtual  acceptance  consist  of  a  written  uncon- 
ditional promise  to  accept  a  bill  already  drawn  or  one  to  be 
drawn  in  the  future,  it  is  binding  in  favor  of  one  who  has  taken 
it  with  a  knowledge  of  the  acceptance  and  in  reliance  thereon. 
The  promise  must  clearly  describe  the  bill  and  must  be  absolute 
in  its  terms. 

4.    CHECKS 

Definition.  —  A  check  is  a  draft,  or  order,  drawn  on  a  bank  or 
banker,  directing  payment  on  demand  by  the  bank  to  a  third 
person  or  his  order  or  to  bearer,  of  a  certain  sum  of  money. 
A  common  form  of  check  follows :  — 


Nf*w  Havfn,  <"onn  ^ —     ^J3^'  \   \f)0*^       No   84Q 
THE  ME-RCHTy)!^  /NATIO/MAL  BAMK. 

Jo  the  order  of 


Dollars. 


^>C^  ^^X^^af 


A  check  is  drawn  by  a  party  having  money  on  deposit  in  the 
bank  and,  as  shown  in  the  definition,  is  a  special  form  of  bill  of 
exchange  with  the  bank  as  drawee.  In  the  above  check  Eldridge 
is  the  maker  or  drawer,  the  Merchants  Bank  of  New  Haven, 
Conn.,  is  the  drawee,  and  Farley  is  the  payee.  A  check  is  in- 
tended for  immediate  payment  upon  presentation,  and  the  implied 
contract  of  the  drawer  is  that  the  bank  will  pay  the  check.  In 
case  it  does  not,  the  drawer  is  liable  absolutely,  and  no  notice  of 
dishonor  is  necessary. 


134  NEGOTIABLE  INSTRUMENTS 

Harrison  v.  Nicollet  National  Bank,  41  Minn.  488,  was  an  action  for  dam- 
ages  for  protesting  the  following  instrument  before  it  was  due. 

"45  Washington  Avenue  South, 
"  Harrison  the  Tailor, 
"$199.92.  "Minneapolis,  Minn.,  March  27,  1888. 

"On  April  14  pay  to  the  order  of  E.  Harrison  one  hundred  and  ninety- 
nine  xVj  dollars.  «J.  T.  HARRISON. 
"  To  Citizens'  Bank, 

"Minneapolis,  Minn." 

Payment  was  demanded  and  the  instrument  protested  on  April  14.  The 
plaintiff  contended  that  it  was  a  bill  of  exchange  and  entitled  to  days  of  grace, 
while  the  defendant  claimed  that  it  was  a  check  and  not  entitled  to  grace. 
Held,  that  one  of  the  essentials  of  a  check  is  that  it  shall  be  payable  on  de- 
mand and,  as  this  was  payable  in  the  future,  it  was  not  a  check  but  a  bill  of 
exchange  and  entitled  to  grace. 

Check  must  be  Presented  without  Delay.  —  But  the  payee  of 
a  check  must  present  it  for  payment  within  a  reasonable  time, 
or  the  drawer  will  be  discharged  from  loss  occasioned  by  his 
delay.  What  would  be  a  reasonable  time  would  depend  upon 
circumstances,  but  it  is  generally  considered  that  the  check 
should  be  presented  within  a  day  after  its  receipt. 

Grange  v.  Reigk,  93  Wis.  552,  was  an  action  against  the  drawer  of  a  check. 
After  banking  hours  on  July  20  defendant  drew  and  delivered  to  plaintiff  in 
Milwaukee,  where  plaintiff  resided,  a  check  for  $1211  upon  the  South  Side 
Savings  Bank  of  that  city.  The  check  was  not  presented  on  July  21, 
although  the  bank  was  open  and  would  have  paid  it  at  any  time  during  the 
banking  hours  of  that  day.  The  bank  failed,  and  did  not  open  after  that  date. 
The  court  held  that  the  party  receiving  a  check  must  present  it  for  payment 
within  a  reasonable  time  in  order  to  preserve  his  right  of  recourse  on  the 
drawer  in  case  of  non-payment ;  and  when  such  party  resides  and  receives 
the  check  at  the  place  in  which  the  bank  is  located,  a  reasonable  time  for  such 
presentation  reaches,  at  the  latest,  only  to  the  close  of  banking  hours  on  the  .suc- 
ceeding day.     The  defendant  in  this  case  is  therefore  discharged  from  liability. 

In  Mohawk  Bank  v.  Broderick,  13  Wend.  (N.Y.)  133,  a  check  drawn  on  the 
Mechanics  &  P'armers  Bank  of  Albany  was  transferred  by  defendant  to  Mej'ers 
and  by  him  deposited  in  the  Mohawk  Bank  of  Schenectady.  This  bank 
retained  the  check  23  days  before  presentment,  although  a  daily  mail  passed 
between  Schenectady  and  Albany,  a  distance  of  16  miles.  When  presented 
payment  was  refused.  Held,  that  the  holders  had  not  used  due  diligence  in 
making  presentment,  and  were  not  entitled  to  maintain  an  action  against  the 
payee  who  had  negotiated  the  check. 


CH ECKS  I  ?  c 

Certified  Checks. —  A  check  purports  to  be  drawn  upon  a 
deposit  made  by  the  drawer  in  the  bank  upon  which  it  is  drawn, 
and  although  in  fact  there  may  be  no  such  deposit,  it  is  still  a 
check. 

Checks  pass  freely  between  parties  as  money,  yet,  unless  the 
drawer  is  known  to  have  on  deposit  in  the  bank  funas  sufficient 
to  meet  the  check,  or  unless  his  solvency  is  known,  a  person  is 
not  safe  in  accepting  the  check.  It  is  therefore  customary  in 
such  cases  to  have  the  bank  certify  the  check,  that  is,  the  cashier 
or  teller  stamps  the  word  "  certified  "  and  the  date  with  his  signa- 
ture on  the  face  of  the  check.  The  bank  then  takes  the  amount 
from  the  drawer's  deposit  and  puts  it  in  a  separate  account. 
The  result  is  that  the  check  is  thereafter  the  check  of  the  bank 
rather  than  of  the  drawer,  and  it  is  good  as  long  as  the  bank  is 
solvent.  When  the  holder  has  the  check  certified,  the  bank  by 
so  certifying  becomes  the  principal  and  only  debtor,  and  the 
holder  by  accepting  the  certified  check  discharges  the  drawer. 
But  if  the  drawer  procures  the  certification  before  delivering 
the  check,  he  is  not  released  from  further  liability. 

Minot  V.  Ritss  and  Head  v.  Hornblower,  156  Mass.  458,  were  two  cases 
arising  from  the  failure  of  the  Maverick  National  Bank  and  decided  together 
by  the  court.  In  the  first  case  the  defendant  on  October  29,  1 891,  drew  a 
check  on  the  Maverick  National  Bank  payable  to  plaintiff,  who  informed  him 
that  the  check  must  be  certified  by  the  bank  before  it  would  be  received.  On 
the  same  day  the  defendant  presented  it  to  the  bank  for  certification.  The 
bank  complied  by  writing  on  the  face  of  it  "  Maverick  National  Bank.  Pay 
only  through  clearing  house.  J.  W.  Work,  Cashier.  A.  C  J.,  Paying  Teller." 
After  the  check  was  certified  the  defendant,  on  October  31,  1891,  delivered 
it  to  plaintiff  for  a  valuable  consideration.  The  bank  stopped  payment  Mon- 
day morning,  November  2,  1891. 

In  the  second  case  on  Saturday,  October  31,  1891.  defendants  drew  their 
check  on  the  Maverick  National  Bank  payable  to  plaintiffs  and  delivered  it 
to  them.  As  the  check  was  received  too  late  to  be  deposited  by  the  plaintiffs 
for  collection  in  time  to  go  through  the  clearing  house  that  day,  plaintiffs 
procured  the  certification  of  the  check  by  the  bank  during  banking  hours  in 
the  following  form  :  "  Maverick  National  Bank.  Certified.  Pay  only  through 
clearing  house.  C.  C.  Domett.  A.,  Cashier."  At  that  time  the  defendants 
in  both  cases  had  on  deposit  sufficient  funds  to  pay  the  checks,  and  the  bank 
on  certification  charged  to  the  defendants'  accounts  the  amounts  of  the  check? 
which  they  credited  to  a  ledger  account  called  certified  checks.     It  was  held 


138  NEGOTIABLE  INSTRUMENTS 

without  recourse  is  not  out  of  the  due  course  of  trade.  The  security  continues 
negotiable,  notwithstanding  such  an  indorsement.  Nor  does  such  an  indorse- 
ment indicate  that  the  parties  to  it  are  conscious  of  any  defect  in  the  security, 
or  that  the  indorser  does  not  take  it  on  the  credit  of  the  other  party  or  parties 
to  the  note.  On  the  contrary,  he  takes  it  solely  on  their  credit,  and  the  in- 
dorser only  shows  thereby  that  he  is  unwilling  to  make  himself  responsible  for 
the  payment." 

Indorsement ;  How  made.  —  The  indorsement  must  be  on  the 
instrument  itself  or  on  a  paper  attached  to  it.  The  indorsement 
must  relate  to  the  entire  instrument ;  a  part  can  not  be  trans- 
ferred by  indorsement,  or  a  part  to  one  party  and  the  remainder 
to  another. 

Hughes  V.  Kiddell,  2  Bay  (S.C.)  324,  was  an  action  against  the  indorser  of 
a  note.  The  note  was  given  by  one  David  Bush  to  the  defendant  Kiddell  for 
;^473  sterling.  Kiddell  afterwards  made  the  following  indorsement :  "  I  assign 
over  to  Hudson  Hughes  the  sum  of  $1930.50  as  part  of  this  note  of  hand. 

"  Benjamin  Kiddell." 

Afterwards  he  made  another  indorsement  and  assigned  the  residue  to 
Hughes.  The  court  held  that  each  indorsement  was  bad,  as  it  affected  only 
part  of  the  note,  and  that  being  so,  two  bad  indorsements  would  not  constitute 
one  good  one. 

Any  writing  intended  to  transfer  the  title  to  the  instrument 
will  be  construed  as  an  indorsement. 

Adams  v.  Blethen,  66  Me.  19,  was  an  action  against  the  indorser  of  the 
following  note :  — 

"  LiNNEUs,  May  30,  1873. 

"I  promise  to  pay  James  H.  Blethen,  or  order,  $137.50  at  ten  per  cent 
interest,  on  demand.  «  Ebenezer  Tozier." 

On  the  back  of  this  note  was  written,  *'  I  this  day  sold  and  delivered  to 
Catherine  M.  Adams  the  within  note.  James  H.  Blethen." 

Held,  that  the  defendant  assumed  all  of  the  liability  of  an  ordinary  indorser. 
This  indorsement  but  expressly  stated  what  every  indorsement  impliedly  states, 
a  sale  or  transfer  of  the  note.  The  liability  of  an  indorser  can  be  limited  or 
qualified  only  by  express  terms. 

Presentment  and  Demand.  —  As  has  been  said,  to  fix  the  lia- 
bility of  the  drawer  or  indorser,  the  first  step  is  presentment  to 
the  drawee  or  maker  and  demand.  Bills  of  exchange  payable  a 
certain  time  after  sight  are  presented  for  acceptance ;  notes, 
ghecks,  and  bills  payable  on  demand  or  sight  are  presented  for 


NEGOTIATION 


139 


payment.  Presentment  consists  in  exhibiting  the  instrument  to 
the  payor  or  handing  it  to  him,  while  demand  is  a  request  to 
either  accept  or  pay  it  as  the  case  may  be.  If  the  paper  is  pay- 
able at  a  bank  the  mere  fact  that  at  the  time  of  maturity  the  paper 
is  at  the  bank  at  which  it  is  payable  is  sufficient  presentment  and 
demand,  provided  the  bank  has  knowledge  of  the  fact. 

Presentment  and  demand  must  always  be  made  at  the  place 
designated  in  the  instrument.  Promissory  notes  are  often  drawn 
in  the  following  form,  designating  the  place  of  payment :  — 


6^S^C^:^ 


mjL-2^ 


'^  ^ 


/c,a^^tuy-,^t.^tL^A::::4x^c^.^ > 


.Du 


^P^uJ^jSq^tt^ 


This  is  called  a  bank  note,  but  the  place  of  payment  desig- 
nated may  be  some  other  place  than  a  bank. 

In  Brooks  v.  Higby,  n  Hun  (N.Y.)  235,  a  bill  was  drawn  on  N.  F.  Mills, 
1 14  South  Main  St.,  St.  Louis,  and  by  him  accepted.  The  notary's  certificate 
stated  that  the  bill  was  presented  for  payment  "  at  the  place  of  business  of 
N.  F.  Mills,  St.  Louis."  It  appeared  that  Mills  had  two  places  of  business  in 
St.  Louis.  The  court  held  that  the  certificate  was  insufficient,  as  it  did  not 
show  at  which  place  presentment  was  made.  The  bill  was  addressed  to  Mills 
at  a  particular  place  and  by  him  accepted  at  that  place,  making  it  the  place  of 
payment,  and  a  due  presentment  and  demand  of  payment  at  that  place  was 
necessary  in  order  to  charge  the  indorser. 

In  case  there  is  no  designated  place  of  payment,  it  is  said 
that  the  paper  is  payable  generally.  This  means  that  it  is  pay- 
able at  the  place  of  business  or  residence  of  the  maker  of  the 
note  or  acceptor  of  the  draft,  and  when  he  has  a  known  place 
of  business,  that  should  have  preference  over  his  residence. 


1 40  NEGOTIABLE  mSTRVMENTS 

Barnes  v.  Vaughan,  6  R.I.  259,  was  an  action  against  the  indorser  of  a 
note  which  was  not  made  payable  at  any  particular  place,  but  was  left  by  the 
plaintiff  at  the  Mount  Vernon  Bank  in  Foster  for  collection.  The  only  demand 
made  upon  the  maker,  Northrup,  was  that  the  usual  printed  bank  notice  was 
mailed  to  him  by  the  cashier  and  directed  to  Providence,  where  he  lived  in  the 
early  part  of  the  month  in  which  the  notes  became  due.  The  court  held  that 
there  was  no  legal  and  proper  demand  made  upon  the  maker  and  therefore 
the  indorser  was  discharged.  The  rule  is  that  in  order  to  charge  the  indorser 
payment  must  be  demanded  of  the  maker  on  the  day  the  note  becomes  due, 
unless  the  note  is  made  payable  at  a  designated  place,  as  at  a  bank  named, 
when  it  is  only  necessary  to  make  demand  at  such  place ;  but  if  no  place  of 
payment  is  named  in  the  note,  it  is  necessary  to  present  it  to  the  maker  person- 
ally or  at  his  place  of  business  or  abode,  otherwise  the  indorser  can  not  be 
charged. 

In  Taylor  v.  Snyder,  3  Denio  (N.Y.)  145,  the  note  was  dated  at  Troy, 
N.Y.  The  maker  then  and  afterwards  resided  in  Florida  to  the  knowledge  of 
the  holder  and  indorsers,  but  presentment  was  made  in  Troy  though  not 
personally  on  the  maker  or  at  his  residence.  It  was  held  to  be  insufficient. 
The  court  said,  "  When  no  change  has  taken  place  in  the  residence  of  the 
maker  between  the  making  of  the  note  and  the  time  of  its  payment,  the  inter- 
vention of  a  state  does  not  dispense  with  the  necessity  of  making  due  demand 
of  payment." 

But  in  M'' Cruder  v.  Bank,  9  Wheaton  (U.S.)  598,  it  was  held  that  when 
a  resident  of  a  state,  after  giving  a  note,  removes  therefrom  and  takes  up  his 
residence  out  of  the  state,  it  is  not  necessary  in  order  to  charge  the  indorser 
to  demand  payment  of  the  maker  at  his  new  residence. 

If  the  maker  or  acceptor  has  neither  a  known  residence  nor 
a  place  of  business,  the  holder  need  only  be  present  with  the 
paper  and  ready  to  receive  payment  at  the  place  where  the  con- 
tract was  made. 

Maiden  Bank  v.  Baldwin,  13  Gray  (Mass.)  154,  held,  that  a  presentment 
for  payment  at  any  bank  in  Boston,  of  a  note  payable  "  at  bank  in  Boston  "  or 
"  at  either  bank  in  Boston,"  was  a  sufficient  demand  upon  the  maker  to  charge 
the  indorser. 

Time.  —  Presentment  for  payment  must  be  made  on  the  day 
on  which  the  instrument  falls  due,  unless  some  "  inevitable 
accident "  or  other  legal  obstacle  prevents  such  presentment. 
The  fact  that  both  the  holder  and  indorser  know  that  the  note 
will  not  be  paid  when  due  and  that  the  maker  is  dead  and 
the  estate  insolvent,  does  not  relieve  the  holder  from  his  ob- 
ligation to  make  presentment  and  give  notice  of  dishonor. 


NEGOTIATION  I^, 

Days  of  Grace.  —  Drafts,  bills  of  exchange,  and  promissory 
notes  formerly  had  days  of  grace,  that  is,  three  days  were 
added  to  the  time  stated  in  which  the  instrument  should  become 
due.  The  purpose  of  this  was  to  give  the  payor  in  the  early 
days  of  slow  transportation  an  opportunity  to  arrange  for  pay- 
ment. A  note  at  thirty  days  drawn  June  lo  would  not  be 
payable  until  July  13;  but  days  of  grace  have  been  abolished 
by  statute  in  most  of  the  states  and  an  instrument  matures 
on  the  date  fixed.  If  given  a  number  of  days  after  date, 
the  day  on  which  the  instrument  is  drawn  is  excluded ;  thus,  a 
note  dated  January  10  payable  thirty  days  after  date  is  due 
February  9.  If  the  date  of  maturity  is  Sunday  or  a  legal 
holiday,  the  instrument  is  payable  on  the  next  succeeding  busi- 
ness day. 

Salter  v.  Burt,  20  Wend.  (N.Y.)  205,  was  an  action  on  a  check  drawn  on 
August  9  but  postdated  August  21,  and  as  checks  are  payable  without  grace, 
the  day  on  which  it  became  due  fell  on  Sunday.  It  was  presented  for  pay- 
ment, and  notice  of  non-payment  was  given  on  Saturday,  August  20.  The 
court  held  that  it  was  presented  before  it  came  due.  If  a  negotiable  instru- 
ment which  does  not  have  grace  falls  due  on  Sunday,  it  becomes  due  and  pay- 
able on  Monday,  but  when  grace  is  allowed  the  rule  is  different,  and  Saturday 
is  the  day  it  becomes  due. 

In  the  states  in  which  days  of  grace  are  yet  allowed,  if  the 
last- day  of  grace  is  a  holiday  or  Sunday,  the  instrument  is  pay- 
able on  the  preceding  day. 

Johnson  v.  Haight,  13  Johns.  (N.Y.)  470,  was  a  case  in  which  the  third  day 
of  grace  fell  on  Sunday,  November  29,  and  payment  was  not  demanded  of  the 
maker  until  November  30.  It  was  held  that  the  law  is  well  settled  that  de- 
mand must  be  made  on  the  third  day  of  grace  unless  that  falls  on  Sunday,  and 
then  payment  must  be  demanded  on  the  second  day  of  grace.  Therefore  in 
this  case  the  indorser  was  discharged. 

But  when  the  time  is  reckoned  by  the  month,  as  it  is  when  the 
instrument  is  made  payable  one  or  more  months  after  date,  the 
note  falls  due  on  the  corresponding  date  of  the  month  in  which 
it  is  due.  Thus  a  note  dated  January  31,  1903,  due  one  month 
after  date,  would  mature  February  28,  1903,  where  no  grace  is 
allowed,  and  if  dated  February  28,  it  would  be  due  March  28. 


142  NEGOTIABLE  INSTRUMENTS 

Roehner  v.  Knickerbocker  Insurance  Co.,  63  N.Y.  160,  held,  that  a  note 
without  grace  dated  December  11,  payable  four  months  after  date,  is  due  and 
payable  April  11. 

Not  only  must  the  presentment  for  payment  be  made  on  the 
right  day,  but  it  must  be  made  at  a  reasonable  time  on  that  day. 
If  presented  at  a  bank,  it  must  be  during  banking  hours.  In 
other  cases  the  time  must  be  at  a  reasonable  hour. 

Dana  v.  Sawyer,  22  Me.  244,  was  a  case  in  which  presentment  for  pay- 
ment was  made  at  the  maker's  house  between  eleven  and  twelve  o'clock  at 
night,  the  maker  being  called  up  from  bed  for  that  purpose.  Held,  that  the 
presentment  was  made  at  an  unreasonable  hour,  and  the  demand  was  not 
sufficient. 

Farnsworth  v.  Allen,  4  Gray  (Mass.)  453,  was  an  action  against  the  in- 
dorser  of  a  note,  and  the  defense  was  insufficient  presentment  and  demand 
for  payment.  The  holder  did  not  know  the  maker's  place  of  residence.  He 
gave  it  to  a  notary  who  arrivedat  the  maker's  house  at  nine  in  the  evening. 
The  maker  and  his  family  had  retired  for  the  night,  but  he  answered  the  bell, 
and  upon  the  note  being  presented  refused  payment.  Held,  to  be  sufficient 
presentment ;  the  rule  is  that  it  must  be  presented  at  such  a  time,  regard  being 
had  to  the  habits  and  usages  of  the  community  where  the  maker  resides,  that 
he  may  reasonably  be  expected  to  be  in  condition  to  attend  to  ordinary 
business. 

Newark  India  Rubber  Mfg.  Co.  v.  Bishop,  3  E.  D.  Smith  (N.Y.)  48,  was 
a  case  in  which  a  note  payable  at  a  bank  was  presented  after  banking  hours 
and  the  clerk  still  there  refused  payment,  although  funds  had  been  left  with 
the  regular  teller  to  pay  it.  Held,  that  the  presentment  and  demand  were  not 
sufficient. 

The  presentment  must  be  made  by  the  holder  or  his  duly 
authorized  agent,  upon  the  proper  person,  who  is  the  maker  or 
acceptor,  or,  if  he  is  dead,  his  personal  representative. 

Stinson  v.  Lee,  68  Miss.  113,  was  an  action  against  an  indorser.  The  nol« 
was  signed  "A.  G.  Cunningham,  Agent."  Nothing  appeared  on  the  face  of 
the  note  showing  for  whom  he  professed  to  act.  Presentment  and  demand  of 
payment  was  made  upon  S.  A.  Cunningham,  the  wife  of  A.  G.  Cunningham. 
Held,  that  the  demand  was  insufficient.  By  the  signature  the  note  was 
made  by  A.  G.  Cunningham,  and  the  demand  to  bind  the  indorser  must  be 
made  on  him. 

Toby  V.  Maurian,  7  La.  493,  was  an  action  against  the  indorser  of  a  note. 
The  defense  was  want  of  due  presentation.  The  maker  died  on  the  last  day 
of  grace.  The  notary  called  with  the  note  and  found  no  one  but  a  mulatto 
woman  who  informed  him  of  the  death  of  the  maker.    The  note  was  then 


NEGOTIATION'  ,4^ 

orotested  without  any  inquiry  or  demand  being  made  of  any  heirs  or  repre- 
sentatives of  the  deceased.  Held,  that  demand  must  be  made  of  the  heirs  or 
legal  representatives  of  deceased  unless  the  impossibility  of  such  demand.is 
shown. 

Notice  of  Dishonor.  —  After  payment  has  been  refused  and  the 
instrument  dishonored,  notice  of  such  dishonor  must  be  given 
to  the  drawer  of  a  bill  of  exchange  and  to  each  indorser  if  a 
bill  or  note,  and  any  drawer  or  indorser  to  whom  such  notice  is 
not  given  is  discharged. 

This  notice  under  the  law  merchant  must  be  given  within 
a  reasonable  time,  but  by  the  negotiable  instrument  law  adopted 
in  many  of  the  states  it  is  expressly  stipulated  when  the  notice 
is  to  be  given.  If  the  parties  reside  in  the  same  place,  it  must 
be  given  the  following  day.  If  they  reside  in  different  places, 
and  notice  is  sent  by  mail,  it  must  be  deposited  in  the  post  office 
so  as  to  go  the  day  following  the  dishonor ;  if  given  otherwise 
than  through  the  mail,  it  must  be  done  in  time  to  be  received  as 
soon  as  the  mailed  notice  would  have  been. 

In  Simpson  v.  Turney,  5  Humph.  (Tenn.)  419,  the  bank  was  the  holder  of  a 
promissorj'  note,  payable  at  said  bank,  made  by  James  H.  Jenkins,  to  Anthony 
Dibrell,  and  indorsed  as  follows,  "A.  Dibrell,  S.  Turney,  and  John  W.  Simp- 
son." Turney's  residence  was  within  one  mile  of  the  bank.  The  note  was 
due  on  February  i,  and  was  protested  on  that  day.  On  February  3  notice  was 
sent  Turney  from  the  bank.  Simpson,  the  next  indorser,  gave  him  no  notice. 
The  court  held  that  the  notice  was  not  given  in  time.  If  it  had  been  given  by 
Simpson  on  the  3d,  it  would  have  been  good,  as  each  indorser  is  given  a  day 
to  notify  his  prior  indorser,  but  this  was  not  done.  The  notice  given  was  not 
valid  as  to  the  bank,  so  could  not  be  to  any  one  to  whose  benefit  it  would  inure. 

Smith  v.  Poillon,  87  N.Y.  590,  was  a  case  in  which  the  holder  notified  the 
third  indorser  by  mail  and  inclosed  notices  for  the  second  and  first  indorsers. 
The  third  indorser  notified  the  second  and  inclosed  notice  for  the  first.  The 
second  indorser  received  the  notice  on  the  6th,  and  mailed  notice  to  the  first 
indorser  on  the  7th,  in  time  to  go  on  the  second  mail  closing  at  1.30  p.m. 
The  first  mail  closed  at  9.30  a.m.,  and  defendant  contended  that  notice  should 
have  been  sent  by  that  mail.  The  court  held  that  the  notice  was  sufficient 
and  that  plaintiflf  had  used  due  diligence  in  giving  notice. 

The  notice  may  be  given  by  the  holder  or  his  agent  or  by  any 
party  who  may  have  to  pay  the  debt  and  who  is  entitled  to  be 
reimbursed. 


144  NEGOTIABLE  INSTRUMENTS 

In  Stafford  v.  Yates,  i8  Johns.  (N.Y.)  327,  a  note  with  two  indorsers  was 
dishonored  and  notice  given  by  the  holder  to  both  indorsers.  Tne  second 
indorser  sued  the  first,  and  it  was  held,  that  the  notice  was  sufficient ;  that  it 
was  not  necessary  for  the  second  indorser  to  give  notice  to  the  first.  It  was 
sufficient  that  notice  was  given  him,  and  the  notice  of  the  holder  inures  to  the 
benefit  of  any  indorser. 

Notice  to  Indorsers.  —  When  there  are  several  indorsers  the 
last  indorser  can  look  to  the  previous  one,  or  in  fact  to  any  one 
who  has  indorsed  before  him,  as  well  as  to  the  maker  or  acceptor. 
Therefore  it  often  happens  that  the  holder  upon  dishonor  of  the 
instrument  gives  notice  to  the  last  indorser,  and  he  in  turn  gives 
notice  to  the  prior  indorser,  to  whom  he  will  look  to  be  reim- 
bursed in  case  he  is  obliged  to  pay  the  instrument. 

The  notice  of  dishonor  may  be  either  oral  or  written,  and  can 
be  either  dehvered  personally  or  sent  through  the  mail.  Some 
cases  hold  that  the  postal  service  can  not  be  used  when  the  par- 
ties reside  in  the  same  town,  but  by  statute  in  New  York  State 
the  post  office  can  be  used  even  in  that  case. 

In  Hobbs  v.  Straine,  149  Mass.  212,  plaintiff  took  a  written  notice  of  dis- 
honor to  defendant's  office,  and  finding  no  one  there,  left  it.  The  court 
instructed  the  jury  that  if  they  determined  that  it  was  left  in  -a  conspicuous 
place,  it  was  sufficient.  Held,  that  this  was  correct.  It  is  sufficient  to  charge 
the  indorser  if  the  notice  is  delivered  personally,  left  at  the  indorser's  place  of 
residence  or  business,  or  deposited  in  the  post  office  addressed  to  him  at  his 
residence  or  place  of  business  with  the  postage  prepaid. 

Waiver.  —  Notice  may  be  waived,  and  frequently  the  indorser 
adds  "  protest  waived,"  the  effect  of  this  being  to  waive  present- 
ment and  notice  of  dishonor  as  well  as  formal  protest. 

In  Shaw  v.  McNeill,  95  N.C  535,  the  note  in  question  had  upon  the  mar- 
gin the  words  "  no  protest."  There  was  no  notice  of  dishonor.  The:  court 
held  that  the  effect  of  these  words  was  to  waive  presentment  and  notice. 

Protest.  —  Protest  is  a  formal  declaration  in  writing  and  under 
seal,  of  an  officer  called  a  notary  public,  certifying  to  the  demand 
and  dishonor.  Protest  of  foreign  bills  of  exchange  is  necessary, 
but  it  is  not  required  in  the  case  of  notes,  checks,  and  inland  bills, 
although  it  is  often  employed  in  giving  notice  of  their  dishonor. 
The  notary  makes  the  presentment  and  demand,  and  upon  re- 
fusal issues  a  certificate  like  the  following :  — 


NEGOTIATION 


145 


County  of MfiHrfig 


J, i]liarl.4B-ltt.  Allen ,  one  of  tRe  Notaries  Public  In  and  for  the 

County  aforesaid,  9o  9^(6{  Cttftfj;,  that  on  the 27Jtli day  of.     AugUBt 

in  the  year  One  thousand  nine  hundred  and  '  five  at  thq  request  of 


I  did  present  the  original . 


bill 


-,  which  is  hereunto  annexed. 


•..ldK.ftr_...lo.5.(L 


at B.p.c3ae.Blfi.r._ 


rz^  N.  Y.,  and  demanded- 


- '. payment  thereof 

:.,  which  was   refused. 


tO^WCfVt^  3,  the  said  Notary,  did  ^pXOUst,  and  by  these  presents  do  publicly  and  solemnly 

Protest,  as  well  against  the  maker  and  tndorser    of  the  said i.JbiJJLrrr:: :.  as 

against  all  others  whom  it  doth  or  may  concern,  for  exchange,- re.ezchange,  and  all  costs,  damages 

and  interest,  already  incurred  or  to  be  bereafter  incurred  by  reason  of  the  non-pa)rment  -         .■ 

of  the  said. -."felUj . 

0lttb  3  bo  fitrtfer  Ctrtifs^  That  on  the  same  day  and  year  above  written,  due  notice*  of  the 

foregoing  demand,  non-payment ssas-and  Protest  (by  notice  partly  printed  and  partly 

written,  signed  by  me)  was  given  to  the_draKgr-ancl.,  the several  endorser*  thereon  by 

depositing  notices  at  the  post-office  at., BOChPPter,,       '  ,  N.  Y..  postage  fuUy 

paid,  directed  as  follows : 

'lo......MEm^.M.*.3%rSf<i»9_ ^%  Rocheater.   New  York. 

To J.o8epli...A.....D«y , at £o.ch.ea.t£.r,_.lle.K..YQrk:. 

To „  Fred.  M.  Rood. ^, ;. .*     Rocheater.  New  Yorlt. 


To  „.jnio«naa_tt.  -JP«8LrcB_ 


.Penn-Yan,  New  York. 


each  of  the  above  named  places  being  the  reputed  place  of  residence  of  tlie  person  to  whom  the 
notice  was-directed,  and  the  post-office  nearest  thereto. 

tfya  bone  an&  ^pvMuMi,  in  the  City —   of Bacliaater..., ,  N.  Y., 

the  day  and  year  first  above  written. 

3n  iccffmonc  tDQtNof,  I  have  hereopta  set  my  hand  and  affixed  my  official  seal 

[L.  S.J  "^^^^1^  _ 

Notary  Public. 


COM.  LAW — 10 


146 


NEGOTIABLE  INSTRUMEN'TS 


After  attaching  the  instrument  to  this  certificate  the  notary 
mails  a  notice  after  the  following  form  to  all  indorsers:  — 


'-■''^^--^^cA,c^i^l,^(^^^^ 


^ease  to  tatie  girtice,  That  a 


dated 
payable 


.■^■^^t^a^rg. 


rfyv?  ff  w<sr»^—/^^ 


Dollars 


/fjp^^ 


=^c^.ig:^ 


^ 


endorsed  by  you,  is  PROTESTED  for  non-payinent,.and  that  the  holders  look  to  70U 
for  the  payment  thereof. 

Your  obedient  jserva 


To 


Notary  PvbUo. 


Irregular  Indorser.  —  Frequently  there  appears  on  the  back 
of  a  bill  or  note  the  name  of  a  person  who  is  not  a  party  to  it 
and  to  whom  it  was  never  indorsed.  Such  a  person  is  known 
as  an  irregular  or  anomalous  indorser.  The  object  of  such  an 
indorsement  is  to  give  additional  security  to  the  payee.  Differ- 
ent states  hold  differently  as  to  the  liability  of  such  a  party, 
some  holding  him  to  be  a  joint  maker,  and  others  a  guarantor, 
but  the  rule  commonly  followed  seems  to  be  that  he  is  liable 
as  an  ordinary  indorser. 

Coulter  V.  Richmond,  59  N.Y.  478,  was  an  action  on  a  promissory  note 
made  by  Anson  and  indorsed  by  defendant,  payable  to  the  order  of  plaintiff. 
The  note  was  indorsed  at  the  request  of  the  maker  before  delivery  to  the 
payee,  to  enable  the  maker  to  purchase  bonds  of  the  payee.  The  court  said  : 
"  in  some  states  such  an  indorser  is  regarded  as  a  guarantor,  in  others  an 
indorser,  and  in  others  a  joint  maker;  but  it  is  well  settled  in  this  state  that  a 
person  making  such  an  indorsement  is  presumed  to  have  intended  to  become 


NEGOTIATION  I47 

liable  as  second  indorser,  and  on  the  face  of  the  paper  without  explanation  he 
is  to  be  regarded  as  second  indorser,  and,  of  course,  not  liable  upon  the  note 
to  the  payee,  who  is  supposed  to  be  the  first  indorser;  but  it  is  competent  by 
proof  to  show  that  the  indorsement  was  made  to  give  the  maker  credit  with 
the  payee  and  others,  to  hold  him  as  first  indorser."  In  this  case  the  latter 
was  found  to  be  the  intention  and  the  indorser  was  held  as  first  indorser. 

Such  indorsements  are  frequently  used  when  the  payee  of 
a  note  wishes  to  get  it  discounted  at  a  bank,  that  is,  to  get  the 
money  on  it.  The  bank  requires  an  indorser,  and  the  payee 
gets  a  friend  to  indorse  the  note.  The  irregular  indorser  is 
liable  to  the  bank  the  same  as  any  other  indorser. 

Accommodation  Paper.  —  The  question  of  accommodation 
paper  must  be  discussed  here,  as  it  is  an  instance  of  the  drawer 
or  indorser  of  a  bill  and  the  indorser  of  a  note  becoming  liable 
without  notice  of  dishonor.  Accommodation  paper  is  the  term 
used  to  denote  negotiable  instruments  that  have  been  executed 
without  consideration  and  for  the  purpose  of  lending  the  name  of 
the  maker,  indorser,  or  acceptor.  To  illustrate,  A  may  desire  a 
loan,  so  he  goes  to  B  and  asks  the  favor.  B  gives  him  a  note 
which  A  indorses  and  discounts  at  the  bank.  If  B  refuses  pay- 
ment at  maturity  because  it  is  really  A's  debt,  the  bank  can,  of 
course,  proceed  against  B,  as  his  name  is  on  the  paper,  but  it 
can  also  proceed  against  A  without  the  formality  of  demand  and 
notice.  The  reason  is  apparent  as,  A  being  the  real  debtor,  it 
can  not  be  supposed  that  he  expects  B  to  pay,  but  considers 
himself  the  principal  debtor. 

American  National  Bank  v.  Junk  Bros.,  94  Tenn.  624,  was  an  action  against 
the  indorser  of  some  notes.  The  defense  was  that  notice  of  dishonor  had  not 
been  given.  It  was  shown  that  the  notes  were  given  for  the  defendant's  accom- 
modation and  then  indorsed  by  him  to  plaintiff.  Such  being  the  case,  it  was 
the  indorser's  duty  to  provide  funds  to  meet  them  at  maturity,  and  he  was 
bound,  therefore,  without  presentment,  protest,  and  notice. 

The  Holder  or  Payee.  —  We  have  yet  to  consider  the  position 
and  rights  of  the  holder  or  payee  of  the  instrument.  Whether 
he  be  the  original  payee  or  an  indorser,  he  is  the  party  in  whose 
hands  the  instrument  rests  and  who  has  the  right  to  the  money 
which  it  represents.    We  have  abready  learned  that  negotiable 


148  NEGOTIABLE  INSTRUMENTS 

instruments  have  a  distinguishing  characteristic  not  possessed 
by  any  other  contract,  which  is  that  when  they  have  passed  into 
certain  parties'  hands  under  particular  conditions  they  are  valid 
and  enforceable,  although  not  valid  between  the  original  parties 
to  them.  The  rule  is  generally  said  to  be  that  a  negotiable 
instrument  in  the  hands  of  an  innocent  purchaser  for  value  and 
before  maturity  is  not  subject  to  any  of  the  defenses  that  might 
be  interposed  to  it  between  the  original  parties,  but  this  is  not 
true  of  certain  absolute  defenses  which  affect  the  very  existence 
of  the  contract,  and  which  we  will  consider  later. 

To  bring  the  instrument  under  the  rule,  the  holder  must  be  an 
innocent  purchaser  for  value,  or  as  it  is  often  expressed,  a  "  bona 
fide  holder  for  value  "  or  a  "  holder  in  due  course."  The  term 
"  bona  fide  holder  "  means  a  holder  who  has  acquired  the  instru- 
ment in  good  faith,  without  knowledge  or  notice  of  any  defenses 
or  defects  that  could  be  set  up  against  any  prior  holder.  To 
constitute  notice,  the  holder  must  have  had  actual  knowledge  of 
the  defect,  or  his  carelessness  must  have  been  so  great  as  to 
amount  to  "bad  faith." 

In  Hotchkiss  v.  National  Bank,  21  Wallace  (U.S.)  354,  the  court  said:  "A 
party  who  takes  negotiable  paper  before  it  is  due  for  a  valuable  consideration, 
without  knowledge  of  any  defect  of  title,  in  good  faith,  can  hold  it  against 
all  the  world.  A  suspicion  that  there  is  a  defect  of  title  in  the  holder,  or  a 
knowledge  of  circumstances  that  might  excite  such  suspicion  in  the  mind  of  a 
cautious  person,  or  even  gross  negligence  at  the  time,  will  not  defeat  the  title 
of  the  purchaser.  That  result  can  be  produced  only  by  bad  faith,  which 
implies  guilty  knowledge  or  willful  ignorance." 

The  instrument  must  be  complete  and  regular  on  its  face. 

Davis  Sewing  Machine  Co.  v.  Best,  105  N.Y.  59,  was  an  action  to  recover 
the  value  of  certain  notes  diverted  by  plaintiff's  president.  When  defendant 
purchased  the  notes  they  were  complete  and  regular  and  signed  by  plaintiff's 
treasurer,  but  they  were  not  signed  by  the  president,  although  a  blank  ruled 
space  with  the  title  of  his  office  printed  thereunder  was  left  at  the  foot  of  the 
instrument.  It  was  conceded  that  the  plaintiff  was  entitled  to  the  notes  unless 
the  defendant  was  a  bona  fide  holder  thereof.  The  court  held  that  any  one 
buying  commercial  paper  which  remains  incomplete  and  imperfect  in  some 
essential  particular  does  not  acquire  the  character  of  a  bona  fide  holder. 


DEFENSES 


149 


He  must  be  a  holder  "  for  value."  This  means  that  he  must 
have  given  a  valuable  consideration  for  it,  and  it  is  not  enough 
that  it  be  a  gift. 

In  DeWitt  v.  Perkins,  22  Wis.  473,  the  plaintiff,  being  acquainted  with  the 
defendant  and  knowing  that  he  was  responsible,  purchased  shortly  before 
maturity  a  promissory  note  against  defendant  for  $300,  paying  therefor  $5.  As 
between  the  original  parties  the  note  was  invalid  for  want  of  consideration. 
Held,  that  the  plaintiff  was  not  a  bona  fide  holder  for  value.  The  considera- 
tion paid  by  him  was  nominal.  It  was  on  the  face  of  it  merely  either  a  gift 
or  a  subterfuge  to  get  the  note  into  other  hands  to  cut  off  the  defense  of 
want  of  consideration. 

We  have  discussed  in  the  subject  of  contracts  what  is  necessary 
to  constitute  a  valuable  consideration. 

The  purchaser  of  a  negotiable  instrument  must  take  it  before 
maturity,  and  if  it  is  a  bill  of  exchange  that  has  been  dishonored, 
without  notice  of  previous  dishonor.  The  mere  fact  that  a  note 
or  bill  is  past  due  is  considered  sufficient  notice  of  defect  to  put 
the  purchaser  on  his  guard,  and  a  party  buying  past  due  paper 
can  not  be  said  to  be  a  bona  fide  holder.  If,  therefore,  in  the  case 
of  a  bill  of  exchange  that  has  been  presented  for  acceptance 
and  dishonored,  this  fact  is  brought  to  the  notice  of  the  pur- 
chaser, he  is  not  a  bona  fide  holder. 

Continental  National  Bank  v.  Townsend,  87  N.Y.  8,  was  an  action  of 
indorser  against  maker.  The  defense  was  a  set-off  against  the  original  payee. 
On  the  last  day  of  grace  the  note  was  indorsed  to  plaintiff.  The  question 
was  whether  or  not  the  transfer  was  made  before  maturity.  The  court  held 
that  it  was  and  that  the  plaintiff  was  a  bona  fide  holder.  The  maker  has  the 
whole  of  the  last  day  to  pay,  so  it  is  not  past  due  until  the  close  of  that  day. 

O'Callaghan  v.  Sawyer,  5  Johns.  (N.Y.)  1 18,  was  an  action  by  indorser  against 
maker.  Defendant  offered  to  prove  a  set-off.  At  the  time  of  the  transfer  of 
the  note  to  the  plaintiff  it  was  overdue.  The  court  held  that  the  set-off  should 
be  allowed.  The  note  had  been  long  overdue  and  dishonored  when  it  was  in- 
dorsed, and  the  point  is  well  settled  that  the  indorser  took  the  note  subject  to 
all  the  equities  and  to  every  defense  which  existed  against  it  in  the  hands  of 
the  original  payee. 

6.     DEFENSES 

General  Statement.  —  It  can  be  stated  as  a  general  proposition 
that  a  bona  fide  purchaser  before  maturity  and  for  value  takes 
title  free  from  all  defects  and  defenses,  or,  as  is  often  stated, 


I50  NEGOTIABLE  INSTRUMENTS 

"  free  from  all  equities  "  except  such  as  affect  the  very  existence 
of  the  instrument  and  which  are  said  to  constitute  absolute 
defenses. 

The  absolute  defenses  are  either  cases  in  which  no  valid  con- 
tract ever  existed,  or  where  the  contract  is  declared  illegal  and 
void  by  statute. 

No  Delivery.  —  The  instrument  may  never  have  been  de- 
livered. It  is  considered  by  the  law  merchant  to  be  a  sufficient 
delivery  to  hold  the  maker  or  acceptor,  if  it  is  handed  over  by 
the  party  himself  or  his  agent  either  with  or  without  authority, 
or  if  it  gets  into  circulation  through  the  negligence  of  the  maker. 
The  question  is,  did  the  maker  deliver  the  instrument  or  was  his 
act  or  representation  responsible  for  its  coming  into  the  hands 
of  bona  fide  holders }  If  this  be  true,  he  must  suffer,  although 
it  was  not  his  intention  to  deliver  the  instrument.  On  the  other 
hand,  if  he  has  been  deprived  of  the  possession  of  the  paper  by 
fraud  or  theft,  he  can  not  be  compelled  to  pay  the  amount  named 
to  any  one,  as  in  this  case  the  instrument  was  never  delivered 
and  no  contract  existed. 

In  Chapman  v.  Rose,  56  N.Y.  137,  defendant  entered  into  a  contract  with 
one  Miller  to  act  as  agent  for  the  sale  of  a  patent  hay  fork,  and  a  contract  was 
signed  by  both,  also  an  order  for  one  hay  fork.  Another  paper  was  then 
presented  to  defendant  which  Miller  said  was  a  duplicate  of  the  order. 
Defendant  signed  it  without  reading  or  examining  it.  It  was  the  note  in  suit 
and  plaintiff  purchased  it  in  good  faith  for  value  and  before  maturity.  Held, 
that  when  one  has  the  opportunity  and  the  power  to  ascertain  the  exact  charac- 
ter of  the  obligation  he  assumes,  and  he  takes  the  word  of  another  instead,  he 
can  not  claim  that  he  intended  to  sign  a  different  instrument  to  defeat  a  bona 
fide  holder.  To  avoid  liability  he  must  show  he  was  guilty  of  no  negligence 
or  carelessness  in  signing. 

If  in  the  making  of  the  instrument  there  was  such  fraud  as 
would  vitiate  a  contract,  then  no  contract  exists,  and  the 
maker  or  acceptor  can  not  be  held. 

Walker  v.  Ebert,  29  Wis.  194,  was  an  action  against  the  maker  of  a  prom- 
issory note  by  the  holder,  who  claimed  to  have  purchased  for  value  before 
maturity.  The  defense  was  that  defendant  was  a  German,  unable  to  read  and 
write  the  English  language,  and  that  the  payee  fraudulently  induced  him  to 
sign  an  instrument  represented  to  him  to  be  a  contract  of  agency,  which  was 
in  fact  a  promissory  note.     Held,  that  it  was  a  good  defense.    The  instru- 


DEFENSES  15, 

ment  never,  in  the  contemplation  of  the  law,  existed  as  a  negotiable  instru- 
ment. The  party  not  having  been  guilty  of  any  negligence  in  signing,  and 
his  signature  having  been  obtained  by  fraud,  he  was  no  more  bound  than  if 
his  signature  was  a  forgery. 

Alteration  or  Forgery.  —  Another  failure  of  contract  arises 
when  there  has  been  a  material  alteration  or  forgery,  for  in 
these  instances  the  minds  of  the  parties  have  not  met  in  the 
contract.  To  alter  the  terms  of  a  negotiable  instrument  without 
authority  after  it  has  been  signed,  destroys  its  validity  even  in 
the  hands  of  a  bona  fide  holder. 

Horn  Sr*  Long  v.  Newton  City  Bank,  32  Kans.  518,  was  an  action  against 
Horn  &  Long,  the  makers  of  a  promissory  note.  The  note  was  given  for  a 
threshing  machine,  and  was  originally  drawn  payable  to  "H.  C.  Pitts'  Sons 
Manufacturing  Company,"  and  after  delivery  to  the  company  it  was  altered 
by  substituting  the  name  of  "  O.  B.  Hildreth  "  as  payee.  The  alteration  was 
made  without  the  knowledge  or  consent  of  Long,  and  he  never  ratified  the 
change.  Horn  and  the  payee  made  the  change.  Held,  that  this  was  a  mate- 
rial alteration  and  released  Long,  although  the  bank  was  a  bona  fide  holder  for 
value. 

Draper  v.  Wood,  112  Mass.  315,  was  an  action  against  Wood  &  Higgins 
as  makers  of  the  following  promissory  note :  — 

«$iooo.  "North  Hadley,  Mar.  31,  1868. 

"  For  value  received,  we  promise  to  pay  L.  L.  Draper,  or  order,  one  thou- 
sand dollars  on  demand,  with  interest  at  12  per  cent. 

"Geo.  a.  Wood. 

"H.  S.  Higgins." 

Higgins  defended  on  the  ground  that  the  note  he  signed  had  been  changed 
by  substituting  "we"  for  "I"  and  adding  the  words,  "at  12  per  cent."  It 
was  shown  that  Wood  made  the  changes  in  good  faith,  but  without  consulting 
Higgins.     Held,  that  the  note  was  void  as  against  Higgins. 

Any  alteration  of  a  negotiable  instrument  which  changes  its 
legal  effect  is  a  material  alteration. 

Sullivan  v.  Rudisill,  63  Iowa  1 58,  was  an  action  upon  a  note.  After  the  noce 
was  given  by  defendant,  with  Fuller  as  surety,  the  plaintiff  innocently  procured 
R  to  sign  as  surety.  The  court  held  the  note  void,  but  allowed  a  recovery 
upon  the  original  consideration.  When  a  promissory  note  has  been  innocently 
altered  without  any  fraudulent  purpose,  the  payee  may  recover  in  an  action  on 
the  original  consideration.  It  was  also  held  that  the  signing  by  a  party  as  a 
joint  maker,  after  the  execution  by  the  original  maker  and  without  his  knowl- 
edge and  consent,  is  a  material  alteration. 


152  NEGOTIABLE  INSTRUMENTS 

There  must  be  an  intent  to  make  the  alteration,  and  it  must 
be  made,  of  course,  without  the  consent  of  the  maker  or  ac- 
ceptor of  the  instrument.  The  alteration  must  also  be  made 
by  a  party  to  the  instrument  or  one  in  lawful  possession  of  it. 
The  holder  can  not  be  prejudiced  or  injured  by  the  act  of  a 
stranger  without  his  consent. 

In  Langenberger  v.  Kroeger,  48  Cal.  147,  a  person  not  a  party  to  the  instru- 
ment, without  authority  wrote  across  the  face  of  a  draft  the  words,  "  payable  in 
United  States  gold  coin."  Held,  that  the  alteration  was  not  such  as  to  vitiate 
the  draft,  although,  if  the  alteration  had  been  made  by  the  payee  or  by  his 
instruction,  it  would  have  invalidated  the  bill,  as  the  change  was  evidently 
material. 

It  will  be  seen  from  the  foregoing  paragraphs  that  when  a 
signature  to  a  negotiable  instrument  is  forged,  the  party  whose 
name  is  so  used  can  not  be  held. 

Want  of  Capacity  to  Contract.  —  The  contract  represented  by 
the  instrument  may  not  be  binding,  for  the  reason  that  the  party 
or  parties  did  not  have  the  capacity  to  contract ;  as,  the  note  or 
bill  of  an  infant  or  lunatic.  Still,  if  a  valid  negotiable  instru- 
ment comes  into  the  hands  of  an  infant,  he  may,  if  of  full  mental 
capacity,  transfer  it  to  another. 

The  mere  fact  that  a  contract  is  illegal  is  not  an  absolute 
defense  to  a  negotiable  instrument  in  the  hands  of  a  bona  fide 
holder ;  but  if  the  contract  is  expressly  made  illegal  and  void 
by  statute,  an  absolute  defense  is  created. 

Equities.  —  Other  defenses  than  those  described  as  absolute 
are  termed  "  equities,"  and  are  valid  defenses  between  the 
original  parties  to  the  instruments,  but,  as  we  have  learned,  can 
not  be  set  up  against  bona  fide  holders.  Lack  of  consideration 
is  a  good  defense  as  between  the  original  parties,  but  not  as 
against  a  bona  fide  holder  for  value.  It  is  an  equity,  and  not  an 
absolute  defense. 

The  fact  that  there  is  an  absolute  defense  to  an  instrument 
does  not  discharge  all  of  the  parties  to  it,  or  through  whose 
hands  it  has  passed.  As  we  have  seen,  such  defense  exonerates 
the  maker  or  acceptor  of  a  negotiable  instrument,  but  it  does 
not  relieve  the  liability  of  the  indorser,  because  every  person 


DISCHARGE 


153 


who  negotiates  such  an  instrument  warrants  that  it  is  genuine, 
that  he  has  a  good  title  to  it,  and  that  all  prior  parties  have 
capacity  to  contract. 

In  Williams  v.  Tishomingo  Saving  Inst.,  57  Miss.  633,  defendants  in- 
dorsed a  bill  of  exchange  to  which  they  claimed  title  through  a  forged  indorse- 
ment. The  court  held  that  the  indorser  warranted  the  genuineness  of  the 
prior  indorsements  on  the  bill  and  also  his  title  to  the  paper.  Should  it  be 
ascertained  even  after  the  payment  of  the  bill  that  any  of  the  indorsements 
were  forged,  the  drawee  can  recover  the  amount  of  the  bill  from  the  party  to 
whom  he  paid  it,  and  each  preceding  indorser  may  recover  from  the  party 
who  indorsed  the  bill  to  him. 


7.    DISCHARGE 

Payment.  —  Negotiable  instruments,  like  other  contracts,  are 
discharged  by  payment.  A  payment  by  the  maker  or  acceptor 
to  the  holder,  and  the  surrender  of  the  instrument  to  him,  ends 
the  transaction  and  releases  all  the  parties  to  the  paper. 

Slade  V.  Mutrie,  156  Mass.  19,  was  an  action  to  recover  the  balance  of  a 
promissory  note.  The  defendant  paid  plaintiff  $125  and  received  the  note 
and  a  receipt  in  full  settlement  of  all  accounts  to  date.  The  jury  found  that 
the  plaintiff  intended  to  receive  the  amount  in  full  payment.  The  court  said 
the  delivery  of  a  promissory  note  by  the  holder  to  the  maker,  with  the  inten- 
tion of  transferring  to  him  the  title  of  the  note,  was  an  extinguishment  of  the 
note  and  a  discharge  of  the  obligation  to  pay  it. 

Payment  before  Maturity.  —  But  if  payment  is  made  before 
maturity,  and  the  paper  should  again  get  into  circulation,  it  would 
be  valid  in  the  hands  of  a  bona  fide  holder  who  acquired  it 
before  maturity. 

Stoddard  v.  Burton,  41  Iowa  582,  was  an  action  against  the  maker  of  a  lost 
or  stolen  promissory  note  made  January  5,  1866,  payable  to  A  or  bearer,  on 
or  before  January  6,  1868.  The  defense  was  that  it  had  been  paid  to  Thomp- 
son, a  holder,  on  October  11,  1866.  The  court  held  that  the  note  by  its  terms 
was  payable  at  any  time  within  two  years  after  its  date  at  the  option  of  the 
maker.  So  it  could  not  be  said  to  be  out  of  the  ordinary  course  of  business  for 
him  to  pay  it  at  any  time,  as  that  express  provision  was  incorporated  in  the 
instrument,  and  the  note  not  having  been  paid  before  maturity  the  plaintiff 
was  not  a  bona  fide  holder. 


154  NEGOTIABLE  INSTRUMENTS 

Payment  by  Indorser.  —  Payment  by  one  of  the  indorsers  after 
the  instrument  has  been  dishonored  does  not  discharge  it,  as  the 
prior  indorsers  and  the  maker  or  acceptor  are  still  liable.  Th& 
payment  to  extinguish  the  instrument  must  be  made  by  or  for 
the  party  primarily  liable. 

The  instrument  may  also  be  discharged  by  the  intentional 
cancellation  thereof  by  the  holder  or  by  any  other  act  that  would 
discharge  a  simple  contract. 

In  Larkin  v.  Hardenbrook,  90  N.Y.  333,  Loper  executed  a  deed  of  cer- 
tain premises  to  defendant,  and  in  consideration  thereof  the  note  in  suit  was 
executed  and  delivered  to  the  grantor,  who  thereafter  intentionally  canceled, 
destroyed,  and  surrendered  the  same  to  the  defendant.  The  court  said : 
"The  rule  is  well  settled  that  where  the  payee  delivers  up  the  obligation 
which  he  holds  against  another,  with  the  intent  and  for  the  purpose  of  dis- 
charging the  debt,  in  the  absence  of  fraud,  such  surrender  operates  as  a 
release  and  discharge  of  the  obligation." 

Discharge  of  Indorser.  —  An  indorser  or  drawer  is  discharged 
by  any  act  that  discharges  the  instrument  or  that  discharges 
a  prior  party.  Thus,  the  third  indorser  on  a  promissory  note 
would  be  discharged  by  any  act  that  would  discharge  either  the 
maker  (which  would  cancel  the  instrument)  or  the  first  or  second 
indorser.  Any  agreement  on  the  part  of  the  holder  of  a  nego- 
tiable instrument  to  extend  the  time  of  payment,  unless  with  the 
assent  of  the  indorsers,  discharges  the  indorsers'  liability. 

8.     INTEREST  AND   USURY 

Definition.  —  As  the  question  of  interest  is  one  that  very  fre- 
quently arises  in  connection  with  negotiable  instruments,  it  is 
well  to  consider  it  here.  A  common  definition  of  interest  is, 
"  The  compensation  paid  for  the  use  of  money."  The  amount 
upon  which  the  interest  is  reckoned  is  called  the  principal.  The 
interest  is  usually  a  certain  annual  per  cent  of  the  principal. 

In  most  of  the  states  the  rate  of  interest  is  prescribed  by 
statute  and  known  as  legal  interest,  and  when  no  rate  is  desig- 
nated by  the  parties  this  rate  will  prevail.  In  some  states  the 
legal  rate  is  fixed  at  6  per  cent,  in  others  7  per  cent.    (See  table, 


INTEREST  AND   USURY 


155 


page  353.)  The  statutes  of  the  different  states  also  determine 
whether  or  not  a  higher  rate  may  be  agreed  upon  between  the 
parties  and,  in  most  cases,  say  how  high  a  rate  may  be  charged 
by  agreement. 

The  taking  of  a  higher  rate  than  that  allowed  by  the  statute 
of  a  particular  state  is  called  usury  and  is  punished  in  some  of 
the  states  by  the  forfeiture  of  all  of  the  interest ;  in  others,  as 
in  New  York  State,  by  the  forfeiture  of  both  principal  and 
interest.  Where  such  statutes  exist,  a  person  agreeing  to 
accept  usurious  interest  can  not  collect  either  the  money  due 
or  the  interest. 

Originally  the  word  "  usury  "  was  identical  in  meaning  with 
interest,  and  meant  any  compensation  taken  for  the  loan  or 
use  of  money,  but  the  modern  sense,  as  will  be  seen,  is  entirely 
different. 

Claims  on  which  Interest  can  be  Collected.  —  Interest  can  be 
collected  on  all  claims  or  amounts  where  it  is  mutually  agreed  by 
the  parties  that  it  is  to  be  paid,  as  on  a  promissory  note,  which 
contains  the  words  "  with  interest "  or  "  with  use,"  or  some  words 
to  the  same  effect.  It  can  also,  without  stipulation  in  the  agree- 
ment, be  collected  upon  debts  from  the  time  they  become  due 
until  they  are  paid ;  in  other  words,  all  overdue  debts  draw 
interest.  An  illustration  is  the  case  of  a  promissory  note  con- 
taining no  provision  for  interest,  as  such  a  note  draws  interest 
from  the  date  it  becomes  due  until  it  is  paid,  but  does  not  draw 
interest  before  maturity. 

In  the  matter  of  Trustees^  etc.,  137  N.Y.  95,  the  court  held  that  interest  may 
not  be  allowed  in  any  case  unless  by  virtue  of  some  contract,  express  or  implied, 
or  of  some  statute  or  on  account  of  default  of  the  party,  when  it  is  allowed  as 
damages  for  the  default. 

But  when  the  amount  of  the  debt  is  not  determined  and  is 
uncertain,  or  where  the  debt  consists  of  a  running  account  with 
payments  at  different  periods,  it  is  held  that  interest  does  not 
attach. 

In  Wood  V.  Hickok,  2  Wend.  (N.Y.)  501,  plaintiffs  were  wholesale  grocers 
and  defendants  country  merchants.  Defendants  purchased  different  bills  of 
goods  of  plaintiffs  between  February,  1824,  and  November,  1825,  amounting 


156  NEGOTIABLE  INSTRUMENTS 

in  all  to  $1190.62,  and  made  various  pa)mients,  amounting  in  June,  1827,  to 
$1191.25.  In  the  suit  the  plaintiffs  charged  interest  amounting  to  $64.87. 
No  mention  had  been  made  of  interest  until  in  1827,  when  an  account  was 
transmitted  in  which  there  was  a  barrel  of  brandy  in  dispute.  Plaintiflts 
claimed  it  was  the  custom  among  grocers  10  charge  interest  after  90  days. 
Held,  that  the  account  was  not  liquidated,  and  an  unliquidated  running  account 
does  not  carry  interest  unless  there  is  an  agreement  between  the  parties  that 
interest  shall  be  allowed. 

Compound  Interest.  —  Interest  upon  interest  can  not  be  col- 
lected in  the  absence  of  a  special  agreement,  and  some  jurisdic- 
tions do  not  allow  it  then. 

QUESTIONS   ON   NEGOTIABLE   INSTRUMENTS 

1.  Define  negotiable  instruments.     What  are  the  principal  classes? 

2.  Name  and  explain  the  principal  source  of  the  negotiable  instrument  law. 

3.  Name  the  principal  characteristics  of  a  negotiable  instrument. 

4.  Is  the  following  a  negotiable  instrument?  "  Rochester,  N.Y.,  Aug.  3, 
1903.  Due  John  Brown,  one  hundred  dollars.  Value  received.  George 
Smith." 

5.  An  instrument  is  written  in  lead  pencil  in  the  following  form  :  "  Buffalo, 
N.Y.  I,  George  Smith,  promise  to  pay  to  Thomas  McCarty,  or  order,  fifty 
dollars.  Value  received."  Mention  three  particulars  in  which  this  paper  is 
not  in  the  usual  form. 

6.  "  Philadelphia,  Pa.,  Sept.  r,  1903.  Five  months  after  date  I  promise 
to  pay  George  Williams  the  sum  of  twenty-five  dollars.  Value  received. 
E.  D.  Parsons."     Is  this  a  negotiable  instrument? 

7.  Is  a  promissory  note  payable  in  Mexican  money  a  negotiable  instru- 
ment? 

8.  Is  there  any  reason  why  the  following  is  not  a  negotiable  instrument? 
Explain.  "Three  months  after  date,  for  value  received,  I  promise  to  pay 
Charles  Benham,  or  order,  one  hundred  dollars,  or  ninety-five  dollars  if  paya- 
ble two  months  after  date.     Signed  Elmer  Clark." 

9.  Is  an  instrument  payable  to  one  of  three  difierent  persons  named 
negotiable  ? 

10.  State  whether  or  not  the  following  is  a  negotiable  instrument.  "  For 
value  received,  I  promise  to  i>ay  to  Thomas  Rice,  or  order,  one  hundred  dollars 
when  he  shall  be  married.     Charles  Ellis." 

1 1 .  Draw  a  promissory  note,  and  name  each  party  to  it. 

12.  Name  three  forms  of  promissory  notes  and  illustrate  each. 

13.  "  One  month  after  date,  for  value  received,  I  promise  to  pay  E.  F.  Sher- 
wood, or  order,  two  hundred  dollars.  James  Grant,  Edward  F.  Grant." 
What  kind  of  promissory  note  is  the  above? 


NEGOTIABLE  INSTRUMENTS  1 57 

14.  A  note  is  signed  James  Willis  by  John  Rogers,  Agent.  Which  of  the 
two  parties  does  the  signature  hold? 

15.  A  note  is  signed  Frank  Getman,  agent  of  William  Carr.  Which  is 
liable  on  the  note,  Getman  or  Carr? 

16.  A  note  is  signed  Erie  Gas  Co.  by  Edward  Booth,  President.  What 
is  the  effect  of  this  signature  in  different  states  ? 

17.  What  is  the  agreement  of  a  maker  of  a  note  as  to  paying  the  same? 

18.  Draw  a  bill  of  exchange.     Designate  the  different  parties  to  the  same. 

19.  How  does  a  bank  draft  differ  from  a  bill  of  exchange? 

20.  Distinguish  between  foreign  and  inland  bills  of  exchange. 

21.  Distinguish  between  time  and  sight  drafts. 

22.  What  is  meant  by  accepting  a  draft,  and  what  is  the  party  called  who 
accepts  it  ? 

23.  What  is  the  obligation  of  the  party  accepting  the  draft  before  and 
after  the  acceptance  ? 

24.  When  must  a  presentment  for  acceptance  be  made? 

25.  When  acceptance  is  refused  what  is  said  of  the  bill? 

26.  Define  acceptance  supra  protest.     Define  virtual  acceptance. 

27.  Draw  a  check.     Designate  the  parties. 

28.  "The  Merchants  Bank  of  Rochester,  Rochester,  N.Y.,  Aug.  25,  1903. 
Thirty  days  after  date  pay  to  the  order  of  George  Harris  one  hundred  and  fifty 
dollars.     William  Copeland."     Is  this  a  check,  or  is  it  a  draft? 

29.  When  must  a  check  be  presented  to  the  bank  for  payment  ?  Upon 
whom  will  the  loss  fall  in  case  of  delay? 

30.  A  check  on  a  Rochester  bank  is  given  to  A  by  B  in  Rochester  on  July 
25.  It  is  not  presented  for  payment  on  the  26th,  and  on  the  27th  the  bank 
fails.     Is  it  A's  or  is  it  B's  loss? 

31.  What  is  a  certified  check?  If  the  check  is  certified  by  the  drawer 
before  its  delivery  and  the  bank  fails  before  the  check  is  paid,  who  loses?  If 
the  payee  secures  the  certification  after  the  check  has  been  delivered  to  him 
and  the  bank  fails  before  payment,  who  loses? 

32.  What  is  meant  by  negotiation  of  a  negotiable  instrument,  and  how  is 
it  accomplished  ? 

33.  Illustrate  a  full  or  special  indorsement.     A  blank  indorsement. 

34.  What  is  the  contract  or  the  undertaking  of  the  indorser?  Upon  what 
is  it  conditioned? 

35.  When  the  indorser  wishes  to  avoid  personal  liability,  how  may  he 
indorse? 

36.  The  indorsement  on  a  one  hundred  dollar  note  is  as  follows  :  "  Pay  to 
X  or  order  fifty  dollars  of  the  within  note.  Signed,  Y."  Is  this  a  good 
indorsement? 

37.  Define  presentment  and  demand. 

38.  If  a  note  is  payable  at  the  Alliance  Bank  of  Rochester,  N.Y.,  where 
must  presentment  and  demand  be  made? 


158  NEGOTIABLE  INSTRUMENTS 

39.  When  must  presentment  for  payment  be  made? 

40.  Define  days  of  grace. 

41.  When  a  negotiable  instrument  with  days  of  grace  falls  due  on  Sunday, 
which  is  the  last  day  of  payment?  If  the  instrument  has  no  days  of  grace, 
which  is  the  last  day  of  payment  ? 

42.  A  note  without  days  of  grace  falls  due  on  July  3,  which  is  Sunday. 
What  is  the  last  day  of  payment? 

43.  If  a  note  has  days  of  grace,  the  last  day  of  grace  being  Monday,  July 
4,  what  is  the  last  day  of  payment? 

44.  A  note  was  presented  the  day  it  matured  at  the  maker's  residence 
between  eleven  and  twelve  o'clock  at  night.  Payment  was  refused.  Was 
the  presentment  good? 

45.  A  note  was  presented  to  the  wife  of  the  maker.  No  effort  was  made 
to  present  it  to  him  personally.     Was  the  presentment  good? 

46.  After  the  instrument  has  been  dishonored,  what  notice,  if  any,  is  required, 
and  to  which  of  the  parties  must  it  be  sent?    When  must  it  be  sent? 

47.  If  no  notice  is  sent  to  any  of  the  indorsers,  what  is  the  effect? 

48.  What  is  protest,  and  upon  what  negotiable  instruments  is  it  necessary? 

49.  Define  an  irregular  indorser.     Define  accommodation  paper. 

50.  What  is  necessary  to  constitute  the  holder  a  bona  fide  holder  for 
value  ? 

51.  Plaintiff  purchased  a  negotiable  note  before  maturity.  The  note  on  its 
face  was  for  $500.  The  purchaser  was  acquainted  with  the  maker  and  knew 
that  he  was  solvent.     He  paid  $25  for  the  note.     Was  he  a  bona  fide  holder? 

52.  If  the  purchaser  had  taken  the  above  note  after  maturity  and  paid  the 
face  value,  $500,  for  it,  would  he  have  been  a  bona  fide  holder? 

53.  A  becomes  the  bona  fide  holder  for  value,  of  a  note  upon  which  the 
maker's  name  was  forged.  Can  he  collect  of  the  maker?  Can  he  collect  of 
the  indorser? 

54.  A  made  and  delivered  a  promissory  note  payable  three  months  after 
date  to  the  order  of  B.  B  after  receiving  the  note  changed  the  time  of  pay- 
ment to  four  months  without  the  knowledge  or  consent  of  A.  Did  this  affect 
A's  liability  on  the  instrument  ? 

55.  C  becomes  a  bona  fide  holder  for  value,  of  a  promissory  note  which 
was  given  from  A  to  B  without  consideration.  C  sues  A  on  the  note  and  A 
sets  up  the  defense  of  no  consideration.     Can  C  recover? 

56.  B  executed  a  promissory  note  to  C  for  $100  payable  three  months  after 
date.  One  month  after  date  he  paid  the  note.  The  note  instead  of  being 
destroyed  was  lost  and  came  into  the  hands  of  X,  a  bona  fide  holder  for  value. 
Can  X  recover  on  the  note? 

57.  Define  interest.     Define  usury. 

58.  Brown  makes  a  note  for  three  months,  but  says  nothing  in  reference  to 
interest.  He  pays  the  note  nine  months  after  having  made  it.  Can  interest 
be  collected  upon  it,  and,  if  so,  for  how  long? 


AGENCY 

I.    IN   GENERAL 

Definition.  —  An  agent  is  a  person  employed  by  another  to 
do  some  act  or  acts  for  the  employer's  benefit  or  on  his  account. 
The  person  for  whom  the  agent  acts  is  called  the  principal. 
Agency  is  the  legal  relation  existing  between  the  principal  and 
the  agent.  A  person  dealing  with  the  agent  is  known  as  the 
third  party. 

The  principal  must  be  a  person  competent  to  make  contracts, 
for  no  one  can  make  a  contract  through  an  agent  which  he  has 
not  the  power  to  make  himself.  The  agent,  since  his  acts  are 
the  acts  of  his  principal,  is  not  necessarily  required  to  be  com- 
petent to  make  a  contract ;  therefore  we  find  it  to  be  the  general 
rule,  that  any  person  with  suflficient  understanding  to  transact 
the  business  committed  to  his  charge  may  be  an  agent.  Infants 
or  married  women  may  be  so  employed,  and  may  bind  their  prin- 
cipals by  a  contract  which  they  could  not  make  themselves. 

It  can  readily  be  seen  how  impossible  it  may  be  for  any  one 
person  to  transact  all  his  business  without  assistance ;  conse- 
quently we  can  easily  realize  the  vast  scope  and  great  impor- 
tance of  the  law  of  agency. 

Classes  of  Agents.  —  Agents  are  usually  divided  into  two 
classes,  general  and  special. 

General  Agent.  —  A  general  agent  is  one  who  is  authorized  to 
transact  all  of  his  principal's  business  of  a  particular  kind,  or  in 
a  certain  place.  Having  received  from  his  principal  a  general 
authority  to  do  certain  acts,  he  is  not  limited  to  the  performance 
of  a  specific  act,  but  is  permitted  a  certain  amount  of  discretion 
in  carrying  on  the  particular  line  of  business  for  which  he  is 
employed.     The  acts  of  a  general  agent,  while  acting  within 

»59 


l6o  AGENCY 

the  scope  of  his  authority,  will  bind  his  principal,  whether  or 
not  they  are  in  accordance  with  his  private  instructions.  If  he 
is  apparently  clothed  with  authority,  the  principal  is  bound. 

Munn  V.  Commission  Co.,  15  Johns.  (N.Y.)  44,  was  a  case  concerning  a 
general  agent,  and  the  court  said  :  "  The  distinction  is  well  settled  between  a 
general  and  a  special  agent.  As  to  the  former,  the  principal  is  responsible 
for  the  acts  of  the  agent,  when  acting  within  the  general  scope  of  his  authority, 
and  the  public  can  not  be  supposed  to  be  cognizant  of  any  private  instruc- 
tions from  the  principal  to  the  agent ;  but  where  the  agency  is  a  special  and 
temporary  one,  there  the  principal  is  not  bound,  if  the  agent  exceeds  his 
employment." 

Special  Agent.  —  A  special  agent  is  one  who  is  appointed  for 
a  special  purpose,  or  to  transact  a  particular  piece  of  business. 
He  is  given  but  limited  authority.  His  acts  do  not  bind  his 
principal  beyond  the  scope  of  the  particular  authority  given 
him. 

It  is  readily  seen  that  the  distinction  is  a  difference  in  degree 
rather  than  in  kind.  In  the  case  of  a  general  agent  there  has 
been  general  power  delegated,  the  authority  is  necessarily  broad, 
and  a  person  dealing  with  such  agent  may  reasonably  infer  that 
he  has  the  authority  usually  conferred  upon  such  agents  under 
like  circumstances ;  while  in  the  appointment  of  a  special  agent, 
the  object  is  to  accomplish  a  special  purpose  or  to  carry  out 
a  particular  piece  of  business,  and  one  would  naturally  infer 
the  authority  was  limited. 

2.     RELATION   OF  PRINCIPAL  AND  AGENT 

Agreement.  —  The  relation  of  principal  and  agent  may  be 
created  in  several  different  ways.  The  ordinary  way  is  by 
agreement,  as  where  one  man  employs  or  appoints  another  to 
represent  him  in  a  certain  transaction  or  in  a  general  way. 
This  is  really  an  agency  by  contract,  except  in  case  of  a  gra- 
tuitous agent,  and  all  the  rules  governing  contracts  govern  also 
the  relations  of  the  principal  and  agent  as  between  themselves. 

The  reason  why  a  gratuitous  agent  is  not  an  agent  by  con- 
tract is  that,  there  being  no  consideration,  the  agreement  can 


RELATION  OF  PRINCIPAL  AND  AGENT  i6l 

not  be  enforced  as  a  contract,  as  we  have  learned  in  the  chapter 
on  contracts. 

An  agent  by  agreement  may  be  appointed  orally  except  in 
the  following  cases  :  — 

First.  Where  by  the  terms  of  the  agency  the  service  is  not 
to  be  performed  within  one  year ;  then,  by  the  statute  of  frauds, 
the  agreement  must  be  in  writing. 

In  Hinckley  v.  Southgate,  ii  Vt.  428,  defendant  made  a  parol  agreement 
in  February  with  plaintiff  that  plaintiff  would  carry  on  defendant's  gristmill 
for  one  year  from  April  i,  next.  Plaintiff  offered  to  perform,  but  defendant 
would  not  allow  him.  It  was  held  by  the  court  that  the  case  was  clearly 
within  the  statute  of  frauds,  since  the  work  was  not  to  be  performed  within 
one  year;  consequently  the  parol  agreement  could  not  be  enforced. 

Tuttle  V.  Siveti,  31  Me.  555,  was  an  action  upon  a  parol  agreement  to 
employ  plaintiff  for  three  years  to  labor  for  defendant  in  making  powder  casks, 
for  which  he  was  to  be  paid  a  certain  price  per  day.  Defendant  refused  to 
permit  him  to  work,  and  it  was  held  that  the  agreement  could  not  be  enforced, 
since  the  labor  was  not  to  be  performed  within  one  year  and  the  contract  was 
not  in  writing. 

Second.  When  the  contract  between  the  principal  and  the 
third  party  is  required  to  be  under  seal,  the  authority  of  the 
agent  to  execute  the  instrument  must  itself  be  under  seal. 

Hanford  v.  McNair,  9  Wend.  (N.Y.)  54.  Here  A  by  writing,  not  under 
seal,  authorized  an  agent  to  enter  into  a  contract  for  the  purchase  of  a  quantity 
of  lumber.  The  agent  entered  into  a  sealed  contract  for  such  purchase.  Held, 
an  agent  can  not  bind  his  principal  by  sealed  instrument  unless  he  has  authority 
under  seal  to  do  it. 

In  Johnson  v.  Dodge,  17  111.  433,  the  question  was  as  to  the  proper  authority 
of  the  agent  to  sell  land.  The  court  said  the  power  to  convey  land  must  be 
in  writing  and  under  seal,  as  the  land  can  be  conveyed  only  by  deed,  and  the 
power  to  convey  must  be  of  equal  dignity  with  the  act  to  be  executed. 

Power  of  Attorney. — The  formal  method  of  appointing  an 
agent  is  by  a  written  instrument  under  seal  known  as  a  power  of 
attorney. 

A  form  similar  to  that  shown  on  the  following  page  is  used 
when  the  power  conferred  is  the  authority  to  sell  and  convey 
certain  real  estate.  When  the  power  conferred  is  to  execute 
a  deed,  mortgage,  or  any  other  instrument  that  is  to  be  recorded, 

COM.  LAW — II 


1 62  AGENCY 

Innm  nil  %n  \\  \m  ^mpuli  ^i 

I,   John  E.  Martin,    of  Albany,   Albany  County,  New  York 
hca)6  made,  constituted  and  appointed,  and  hij  these  presents  do  make,  constitute  and  appoint 

_jr.jOjaeph...A....l)ey.4.....Qf....BQ.Ch..e.ste.r,....N.eyir...Yo.rJ5.,..  my. true  and  lawful  attorney 

f6r.—J^ and  in ^X.^.name. place  and  stead 12  £11*"*  •   bargain,    and 

sell  all  my  real  estate  situated  in. the  said  Rochester,  New  York, 
or  any  part  thereof,   for  such  price, and  on  such  terms,   as  to  him 
shall  seem  best,  and  for  me  and  in  my  name,   to  make,   execute, 
acknowledge,   and  deliver  good  and  sufficient  deeds  and  convey- 
ance for  the  same,   either  with  or  without  the  covenants  of  war- 
ranty: — — — — — ' 

giving  and  granting  unto  my  said  attorney  full  power  and  authority  to  do  and  perform 
all  and  every  act  and  thing  whatsoever  requisite  and  necessary  to  he  done  in  and  about  the 
premises,  as  fully  to  all  intents  and  purposes,  as  I  vtight  or  could  do  if  personally 
present,  with  full  power  of  substitution  and  revocation,  hereby  ratifying  and  confirming  aU 
that      my  said  oMorney  or    his       substitute  shall  lawfully  do  or  cause  to  he  done  hy 

virtue  hereof. 

In   MltnC00  1KIlbCrC0f^...-l have  hereunto  set... .my.  Jiand   and  seal    the...lQtiL—. 

day  o/'......Q.Cti.0.b.fiX in  the  year  one  thousand   nine  hundred  and _..fJL'!t6__™„.___ 


Sealed  and  delivered  in  the  presence  of 


(^^//u^tJi^JKm 


^tatjeof Mew  York 

Clfey of Albftnx \  ^^' 

County  of Albany 

On  the        e  ight  eenth day  of. 0  Ct  Ob  e  r in  the  gear  nineteen 

hundred  and,       five    before  me  personally  esame 

. John  E.  Martin  j- 


to  m^  known  and  known  tomato  be  the  individual     deseriied  in,  and  who  executed  the  foregoing 
instrument  and      he  duly  acknowledged    that      he  exetuted  the  same. 


U(3^( 


(VV-rt-ft^A^^  Notary  Public 


RELATION  OF  PRINCIPAL  AND  AGENT  163 

the  power  of  attorney  must  be  so  executed  as  to  entitle  it  to 
be  recorded  in  the  same  place.  This  requires  that  it  shall  be 
acknowledged  in  substantially  the  form  shown  on  page  162 
before  a  notary,  public,  or  some  other  officer  empowered  by  law 
to  take  such  acknowledgment. 

This  form  may  be  used  to  confer  other  authority  by  inserting, 
in  place  of  the  authority  to  sell  real  estate,  the  exact  authority 
intended. 

Ratification.  —  The  second  way  in  which  the  relation  of  prin- 
cipal and  agent  may  be  created  is  by  ratification. 

The  assent  of  the  principal  to  the  act  of  the  agent  may  be 
given  either  before  or  after  the  agent's  act.  If  given  before, 
then  it  is  an  agency  by  agreement  and  has  already  been  ex- 
plained. If  given  after  the  act  has  been  performed  by  the 
agent,  it  is  a  ratification  of  this  act  and  gives  the  same  effect  to 
it  as  though  there  had  been  a  previous  appointment.  This  may 
be  true  in  a  case  where  the  agent  had  no  previous  authority 
whatever,  or  where  the  agent  had  some  prior  authority  but 
exceeded  this  authority  in  the  particular  act.  The  ratification 
operates  as  an  extension  of  the  authority  to  this  act 

In  Merritt  v.  Bissell,  84  Hun  (N.Y.)  194.  it  was  held  that  where  a  person  was 
clothed  with  some  authority  as  agent,  the  ratification  by  his  principal  of  his 
unauthorized  acts  relates  back  and  makes  such  acts  of  the  agent  the  acts  of  the 
priricipal  from  the  beginning,  the  same  as  though  they  had  been  duly  author- 
ized at  the  start. 

The  ratification  to  bind  the  principal  must  be  made  with  a 
knowledge  of  all  the  material  facts  ;  if  made  under  a  misunder- 
standing, or  through  a  misrepresentation,  the  principal  will  not 
be  bound.  The  principal  nmst  repudiate  the  agent's  unauthor- 
ized act  within  a  reasonable  time  after  he  learns  of  it,  or  he  will 
be  presumed  to  have  ratified  it.  The  ratification  may  be  by 
express  words  or  by  accepting  the  benefits  of  the  act. 

In  Pike  V.  Douglass,  28  Ark.  59,  A  without  authority  purchased  a  bill  of 
goods  for  persons  about  to  form  a  copartnership,  in  their  name  and  on  their 
credit  as  partners.  They  received  the  goods  and  sold  them.  One  of  the 
partners  afterwards  repudiated  the  purchase,  claiming  that  the  other  partner 
was  to  buy  the  goods  and  that  the  agent  had  no  authority  to  buy  for  him, 


l64  AGENCY 

and  he  so  advised  the  sellers.  Held,  this  was  not  sufficient.  He  should  have 
restored  the  goods,  but  as  they  kept  the  goods  they  were  liable  as  partners ; 
they  had  ratified  the  act  by  retaining  the  benefit. 

But  if  the  principal  ratifies  the  act  it  must  be  as  a  whole, 
for  he  can  not  accept  the  benefits  of  a  part  and  reject  the 
remainder. 

An  axiom  of  the  law  is,  "  A  man  can  not  take  the  benefits  of  a 
contract  without  bearing  its  burdens." 

In  Eberts  v.  Selover,  44  Mich.  519,  a  subscription  agent  canvassing  for  a 
history  to  cost  $10,  had  a  book  for  signatures,  and  on  this  it  was  printed  that 
no  terms  except  those  printed  thereon  should  be  binding.  A  justice  of  the 
peace  consented  to  sign  on  condition  that  his  office  fees  from  that  time  to  the 
time  of  delivery  of  the  book  should  be  taken  in  .payment.  This  was  agreed, 
and  he  was  given  a  written  memorandum  by  the  agent  to  that  effect.  Held,  if 
the  company  ratified  the  contract  it  must  be  upon  the  terms  agreed  upon.  As 
the  agent  went  beyond  his  authority  they  could  repudiate  the  contract  and  refuse 
to  deliver  the  book,  but  they  could  not  repudiate  part  and  still  hold  the  subscriber. 

Necessity.  —  The  third  way  in  which  the  relation  between 
principal  and  agent  may  be  created  is  by  necessity. 

This  is  where  the  relations  or  positions  of  the  parties  are  such 
that  the  authority  of  the  principal  is  presumed.  The  leading 
illustration  of  this  is  the  case  of  husband  and  wife.  The  wife 
can  contract  for  the  necessities  of  the  household  and  bind  the 
husband  for  their  payment. 

Benjamin  v.  Dockham,  134  Mass.  418,  was  an  action  for  the  price  of  milk 
delivered  to  defendant's  wife,  who  because  of  his  cruelty  was  living  apart  from 
him.  Held,  that  as  the  wife  is  authorized  by  law  to  pledge  her  husband's 
credit,  it  is  a  case  of  compulsory  agency  and  her  request  is  his  request. 

Another  illustration  is  that  of  a  shipmaster,  who  has  authority 
in  case  of  necessity  to  purchase  supplies  for  the  vessel  and 
pledge  the  credit  of  the  owner. 

In  McCready  v.  Thorn,  51  N.Y.  454,  an  action  was  brought  against  the 
owners  to  recover  for  services  and  advances  rendered  to  the  master  of  the 
ship.  The  master  was  running  the  vessel  under  an  arrangement  with 
the  owners  whereby  the  master  was  to  furnish  everything  and  divide  the 
profits,  but  the  plaintiff  had  no  notice  of  this.  The  owners  of  the  vessel  were 
found  liable  for  moneys  and  labor  so  advanced. 


OBLIGATION  OF  PRl/StClPAL   TO  AGENT  165 

3.    OBLIGATION   OF   PRINCIPAL  TO  AGENT 

Compensation; — The  principal  is  under  obligation  to.  the 
agent  to  compensate  him  for  his  services. 

When  the  agreement  fixes  the  compensation  the  agent  is  to 
receive,  this,  of  course,  will  control. 

Wallace  v.  Floyd,  29  Pa.  St.  184.  Here  the  plaintiff  agreed  to  work  for  a 
given  time  at  a  certain  salary.  He  stayed  beyond  the  time,  and  nothing  was 
said  about  the  salary  for  the  additional  period.  It  was  held  that  he  could 
recover  the  salary  only  at  the  rate  agreed  upon.  It  was  said  that  the  best 
valuation  of  services  was  that  mutually  agreed  upon  by  the  parties  themselves. 

In  the  absence  of  an  express  contract,  the  law  will  imply  an 
agreement  to  pay  what  the  services  are  reasonably  worth,  unless 
it  can  be  fairly  inferred  that  the  services  were  intended  to  be 
gratuitous. 

Even  if  the  service  was  unauthorized  but  is  subsequently 
ratified,  and  the  benefit  is  accepted  by  the  principal,  the  agent, 
ordinarily,  can  recover  for  the  service  to  the  same  extent  as 
though  the  service  had  been  originally  authorized. 

In  Gelatt  v.  Ridge,  wj  Mo.  553,  plaintiff  was  employed  to  sell  real  estate 
on  the  owner's  terms.  He  sold  on  other  terms,  but  the  principal  ratified  the 
sale.     Held,  that  the  agent  was  entitled  to  his  commissions  as  originally  agreed. 

The  principal  is  also  under  obligation  to  reimburse  the  agent 
for  any  sums  which  he  may  have  paid  out,  or  for  which  he  may 
have  become  individually  liable  in  the  due  course  of  his  agency 
and  for  the  principal's  benefit. 

Maitland  v.  Martin,  86  Pa.  St.  120,  was  a  case  in  which  a  broker  purchased 
for  B  certain  bonds  which  B  left  in  his  hands  several  years,  when  he  directed 
that  they  be  sold.  It  was  then  learned  that  three  of  the  bonds  had  been 
repudiated  by  the  state  where  issued.  Held,  that  the  broker  might  be  reim- 
bursed. That  the  loss  fell  on  B  if  the  broker  acted  within  the  lines  of  his 
duty  and  in  good  faith. 

The  agent  is  further  entitled  to  indemnity  from  his  principal 
for  the  consequences  of  any  act  performed  within  his  authority 
and  in  the  execution  of  his  employment.  But  to  be  entitled  to 
indemnity  the  act  must  be  lawful,  or  the  agent  must  have  been 
ignorant  of  the  fact  that  the  act  was  illegal. 


1 66  AGENCY 

In  Moore  v.  Appleton,  26  Ala.  633,  plaintiff  brought  an  action  to  be  reim- 
bursed for  damages  which  he  had  been  obliged  to  pay  because  of  certain  acts 
performed  by  him  as  agent  for  defendant  in  dispossessing  a  third  party  of 
lands  claimed  by  the  defendant  and  which  plaintiff  had  reason  to  believe 
belonged  to  defendant.  Held,  that  the  act  was  not  manifestly  illegal,  and 
that  the  law  implies  a  promise  of  indemnity  by  the  principal  for  losses  which 
flow  directly  and  immediately  from  the  execution  of  the  agency. 

4.    OBLIGATION   OF  AGENT  TO  PRINCIPAL 

Agent  must  obey  Instructions. — The  agent  is  under  obliga- 
tion to  his  principal  to  obey  the  principal's  instructions.  So 
long  as  the  agent  carries  out  his  instructions  he  is  protected, 
but  if  he  goes  contrary  to  them  and  loss  ensues,  he  is  liable  for 
the  damage ;  as,  where  an  agent  is  instructed  by  his  principal 
to  send  a  certain  claim  for  collection  to  A,  and  instead  he  sends 
it  to  B  and  loss  ensues,  the  agent  is  liable. 

In  Whitney  v.  Merchants  Union  Express  Co.,  104  Mass.  152,  the  Express 
Company  received  for  collection  a  draft  with  instructions  to  return  at  once  if 
not  paid.  They  instead  held  the  draft  until  the  drawee  wrote  for  some  ex- 
planation. They  then  failed  to  present  it  for  two  days  after  the  drawee  had 
received  a  reply  from  the  drawer,  and  at  this  time  the  drawee  became  insolvent. 
Held,  that  the  Express  Company  was  liable  to  the  drawer. 

Agent  must  use  Judgment.  —  The  agent  owes  the  duty  to  his 
principal  to  exercise  judgment  and  skill  necessary  to  the  prudent 
and  careful  discharge  of  his  agency.  This  prudence  and  skill 
can  generally  be  said  to  be  the  same  as  is  ordinarily  observed 
by  prudent  and  careful  men,  under  similar  circumstances  and 
engaged  in  similar  business. 

Whitney  v.  Martine,  88  N.Y.  535,  was  a  case  where  an  attorney  was  em- 
ployed as  agent  to  loan  mone3's  on  bond  and  mortgage.  He  made  loans 
when  the  parties  giving  the  bonds  were  insolvent  and  took  mortgages  on 
realty  already  mortgaged.  The  principal  lost,  and  it  was  held  that  the 
attorney  was  liable  to  his  principal  for  the  loss. 

Thus,  an  agent  to  purchase  a  car  load  of  wheat  must  exercise 
and  possess  only  such  knowledge  and  skill  as  is  common  to 
careful  dealers  in  grain ;  while  an  agent  to  purchase  an  expen- 
sive and  intricate  engine  is  bound  to  exercise  the  caution  and 
skill  of  an  engineer. 


OBLIGATION  OF  AGENT  TO  PRINCIPAL  167 

Fiduciary  Relation.  —  There  exists  between  the  principal  and 
his  agent  what  is  said  to  be  a  fiduciary  relation,  which  means 
that  their  relations  are  such  that  the  utmost  good  faith  is 
required  in  their  dealings.  An  agent  can  not,  therefore,  acquire 
any  rights  that  are  contrary  to  the  interests  of  the  principal. 
He  must  not  act  for  both  the  principal  and  the  third  party  in  a 
transaction  without  their  consent. 

Walker  v.  Osgood,  98  Mass.  348,  was  an  action  by  a  real  estate  agent  for 
commissions.  Defendant  had  employed  him  to  sell  or  trade  his  farm  and  the 
agent  effected  an  exchange  and  made  an  agreement'  with  the  third  party  that 
he  was  to  receive  from  him  a  commission.  It  was  held  by  the  court  that  the 
broker  was  the  agent  of  the  owner  and  could  not  act  for  the  third  party,  and 
if  he  exacted  from  the  third  party  a  promise  of  compensation,  he  could  not 
recover  of  the  owner  for  his  services,  even  though  an  exchange  or  sale  was 
effected.  The  interests  of  the  parties  are  adverse,  and  an  agent  for  one  can 
not  act  for  the  other  without  his  knowledge  and  consent. 

Neither  must  the  agent  use  his  position  or  authority  for  his 
own  benefit. 

In  Bunker  v.  Miles,  30  Me.  431,  defendant  was  employed  by  plaintiff  to 
buy  a  certain  horse  for  him  for  $80  or  as  much  less  as  he  could,  and  was  to 
have  $1  for  his  trouble.  Defendant  bought  the  horse  for  $72.50,  and  returned 
to  plaintiff  no  part  of  the  $80.  The  court  allowed  plaintiff  to  recover  the 
balance  of  $7.50,  holding  that  the  agent  could  not  make  a  profit  for  himself 
out  of  the  transaction. 

An  agent  authorized  to  sell  or  rent  will  not  be  permitted  to 
buy  or  lease  the  property  himself  without  the  principal's  consent. 

Kerfoot  v.  Hyman,  52  111.  512.  Here  plaintiff  owned  certain  land  and 
employed  defendant  to  sell  it  for  a  certain  amount.  The  defendant  bought  it 
himself  and  took  the  title  in  the  name  of  a  third  party,  but  for  his  own  benefit 
without  the  owner's  donsent,  and  at  the  same  time  had  a  part  of  it  sold  for  as 
much  as  he  obtained  for  the  whole  of  it  for  the  plaintiff.  Held,  that  the  agent 
must  account  to  the  plaintiff  for  the  excess  received,  and  the  remainder  not 
sold  will  revert  to  the  principal. 

Also  an  agent  commissioned  to  compromise  a  claim  can  not 
purchase  it  at  a  discount  and  then  enforce  it  in  full  against  the 
principal.  The  agent  is  under  obligation  to  his  principal  to 
render  a  true  account  of  all  of  the  proceeds  and  profits  of  the 
agency. 


l68  AGENCY 

In  'the  absence  of  an  express  agreement  to  the  contrary  the 
agent  must  render  an  account  to  his  principal  upon  demand  or 
within  a  reasonable  time. 

Subagents-  —  Another  obligation  of  the  agent  to  his  principal 
is  to  act  in  person,  except  when  authorized  either  by  his  principal 
or  by  established  custom,  to  appoint  subagents.  The  reason 
for  this  is  obvious  ;  the  principal  employs  the  agent  because  of 
his  confidence  and  trust  in  his  ability  and  honesty  to  act  in  his 
stead,  and  the  agent  appointed  can  not  delegate  to  another  the 
duty  or  trust  which  Has  been  confided  to  him. 

Still,  an  agent  can  in  some  cases  appoint  subagents  to  perform 
duties  which  do  not  involve  an  exercise  of  his  discretion,  but  are 
merely  mechanical  or  ministerial  acts. 

In  Renwick  v.  Bancroft,  56  Iowa  527,  A  was  employed  to  sell  a  piece  of 
realty  and  to  fix  the  price,  etc.  After  looking  over  the  property  he  employed 
B  to  find  a  purchaser  and  B  did  find  such  a  purchaser  and  sold  the  property. 
It  was  held  that  the  agent  might  properly  appoint  such  a  subagent,  as  there 
was  no  discretion  placed  in  the  subagent,  and  A  could  employ  such  party  as 
he  wished  to  help  him  in  carrying  out  the  agency. 

Sometimes,  from  the  nature  of  the  case,  it  is  implied  that  the 
agent  is  to  appoint  another  agent  for  his  principal.  In  that  case 
the  first  agent  is  relieved  from  Hability  for  the  acts  of  the  third 
party  if  he  himself  uses  care  and  discretion  in  his  appointment ; 
whereas  if  he  but  employs  a  subagent,  he  is  personally  liable  to 
the  principal  for  the  acts  of  the  subagent  to  the  same  extent 
precisely  that  he  would  be  in  case  they  were  his  own  acts. 

A  very  interesting  illustration  of  this  point  is  the  case  of  a 
man  depositing  at  his  home  bank  commercial  paper  payable  at 
some  other  city.  The  question  then  is,  does,  the  owner  of  the 
paper  authorize  the  home  bank  to  appoint  subagents,  or  does  he 
authorize  it  to  employ  additional  agents  in  his  behalf } 

It  is  evident  that,  whichever  view  is  maintained,  it  is  within 
the  contemplation  of  the  parties  that  the  home  bank  can  not 
execute  the  agency  alone  but  must  have  aid  at  the  point  where 
the  note  or  paper  becomes  due.  If  the  correspondent  bank  is 
a  subagent,  then  the  home  bank  is  liable  for  its  acts  the  same  as 
for  its  own ;  but  if  the  home  bank  had  the  authority  to  appoint 


OBLIGATION  OF  AGENT  TO  PRINCIPAL  169 

the  correspondent  bank  an  agent  for  the  principal,  the  corre- 
spondent bank  is  liable  directly  to  the  principal,  and  the  home 
bank,  if  it  used  care  in  appointing  the  agent,  is  exonerated. 

In  New  York,  Michigan,  and  some  other  states  the  first  theory 
is  held. 

Allen  V.  Merchants  Bank,  22  Wend.  (N.Y.)  215,  is  a  case  where  a  draft 
was  drawn  by  plaintiff  in  New  York  on  a  Philadelphia  merchant  and  deposited 
by  plaintiff  in  the  Merchants  Bank  of  New  York.  Defendant  bank  sent  the 
draft  to  the  Philadelphia  bank.  It  was  presented  by  the  Philadelphia  bank 
notary,  but  he  did  not  properly  protest  it,  and  because  of  the  lack  of  the  proper 
protest  plaintiff  lost.  Held,  that  the  bank  receiving  a  draft  is  liable  for  any 
neglect  of  duty  in  the  collection,  whether  arising  from  the  default  of  its  offi- 
cers, its  correspondents  abroad,  or  the  agents  of  its  said  correspondents. 

The  second  theory  is  held  in  Iowa,  Massachusetts,  Pennsyl- 
vania, and  other  states. 

In  Guelich  v.  National  State  Bank,  56  Iowa  434,  a  bill  of  exchange  was 
deposited  with  defendant  bank  of  Burlington,  Iowa,  against  a  New  York  party. 
Defendant  sent  it  to  the  Metropolitan  Bank  of  New  York  for  collection. 
This  bank  failed  to  present  it  for  payment  and  protest  in  proper  time.  Held, 
when  the  holder  of  a  bill  of  exchange,  payable  at  a  distance,  deposits  it  in  a 
local  bank  for  collection,  he  thereby  assents  to  the  course  of  business  of  banks 
to  collect  through  correspondents,  and  the  correspondent  bank  becomes  his 
agent  and  is  responsible  to  him  direct  for  its  negligence  in  failing  to  present 
the  bill  within  the  proper  time. 

Gratuitous  Agent.  —  It  may  be  well  to  note  also  the  legal 
relation  of  the  agent  who  undertakes  to  perform  some  service 
for  the  principal  without  compensation. 

In  such  a  case  the  promise  being  without  consideration  is  not 
enforceable,  and  the  agent  can  not  be  held  liable  for  neglecting 
or  refusing  to  perform. 

Thome  v.  Deas,  4  Johns.  (N.Y.)  84.  Here  A  and  B  were  joint  owners  of  a 
vessel  and  A  voluntarily  undertook  to  get  the  vessel  insured,  but  neglected  to 
do  so,  and  the  vessel  was  lost.  Held,  that  no  action  would  lie  against  A  for 
his  non-performance,  though  damage  resulted  to  B,  as  there  was  no  consider- 
ation for  A's  promise. 

But  if  the  agent  enters  upon  the  performance  of  the  under- 
taking, he  is  bound  to  exercise  skill  and  care  in  what  he  does. 


1 70  AGENCY 

In  Williams  v.  Higgins,  30  Md.  404,  a  party  undertook  voluntarily  and 
gratuitously  to  invest  money  for  another.  It  was  held  that  in  such  a  case  the 
gratuitous  agent  must  use  due  diligence  and  exercise  proper  caution  or  he  will 
be  liable,  and  if  he  is  given  positive  instructions,  he  will  be  liable  if  he  disre- 
gards them. 

The  question  of  gratuitous  agent  often  comes  up  in  the  case 
of  bank  directors,  who  fill  their  offices  without  compensation. 

Delano  v.  Case^  121  111.  247,  held,  if  bank  directors  are  guilty  of  negligence 
in  permitting  their  bank  to  be  held  out  to  the  public  as  solvent,  when  in  fact 
it  is  insolvent,  and  thereby  induce  parties  to  deposit  their  money  there  and  it 
is  lost,  such  depositors  may  recover  from  the  directors,  as  they  are  bound  to 
exercise  care  and  dilligence  in  their  offices. 


5.     OBLIGATION   OF   PRINCIPAL  TO  THIRD   PARTY 

Scope  of  Authority. — The  main  object  of  agency  is  to  effect 
a  contractual  relation  between  the  principal  and  the  third  party. 
The  identity  of  the  principal  may  be  disclosed  or  it  may  be 
withheld.  In  the  case  of  either  a  disclosed  or  an  undisclosed 
principal,  he  is  bound  by  such  acts  of  the  agent  as  are  within 
the  actual  or  apparent  scope  of  his  authority. 

The  difficult  question  then  is  to  determine  what  is  the  scope 
of  his  authority.  If  the  principal  clothes  the  agent  with  ap- 
parent authority  to  do  an  act,  the  principal  is  bound,  although 
the  agent  had  private  instruction  to  the  contrary,  or  had  a 
limit  put  upon  this  authority. 

A  doctor  might  employ  an  agent  to  buy  him  a  particular 
horse.  He  has  no  apparent  authority  to  buy  a  team  or  any 
other  horse.  But  when  a  stock  dealer  employs  an  agent  to  buy 
horses  for  him,  the  agent  has  apparent  authority  to  buy  a  team, 
although  he  may  have  had  private  instructions  to  the  contrary. 
The  one  is  clearly  a  special  and  the  other  a  general  agent. 

It  seems  settled  that  when  the  agent  has  apparent  authority 
the  principal  is  bound.  It  is  only  required  in  such  a  case  that 
the  person  dealing  with  the  agent,  acting  with  average  prudence 
and  in  good  faith,  is  justified  in  believing  that  the  agent  pos- 
sesses the  necessary  authority.  • 


LIABILITIES  OF  PRINCIPAL  FOR   TORTS  OF  AGENTS      171 

Notice  to  Agent  —  It  is  the  rule  that  notice  to  the  agent  of 
anything  within  the  scope  of  the  agency  is  notice  also  to  the  prin- 
cipal. And  the  principal  is  chargeable  with  knowledge  of  all 
the  facts  that  have  been  brought  to  his  agent's  attention  in  the 
transaction  in  which  the  agent  is  acting  for  the  principal. 

If  this  were  otherwise,  the  principal  would  be  in  a  position 
to  claim  ignorance  whenever  he  might  wish  to  do  so,  and  there- 
fore would  be  in  a  better  position  than  if  he  dealt  with  the  third 
party  direct. 

6.     LIABIIITY  OF  PRINCIPAL  FOR  TORTS  OR  WRONGS 

OF  AGENT 

General  Rule.  — The  principal  is  liable  for  the  contractual  ob- 
ligations of  his  agent  in  his  behalf,  and  there  are  various  ways 
in  which  he  can  be  rendered  liable  by  the  agent  for  the  agent's 
torts  or  wrongful  acts. 

The  rule  is  that  the  principal  is  liable  for  the  wrongs  com- 
mitted by  the  agent  in  the  course  of  his  employment  and  for 
the  principal's  benefit. 

This  is  obviously  true  where  the  principal  commands  or  rati- 
fies the  act,  and  we  find  that  it  is  also  true  where  the  principal 
neither  ratifies  nor  commands  it.  The  law  considers  that  when 
i  person  chooses  to  conduct  his  affairs  through  another,  he  must 
r>ee  that  they  are  managed  with  due  regard  for  the  rights  and 
safety  of  others. 

Dempsey  v.  Chambers,  154  Mass.  330,  was  an  action  for  damages  in  break- 
ing a  plate-glass  window.  It  was  proved  that  the  party  who  delivered  coal 
for  the  defendants,  and  in  so  doing  broke  the  window,  was  not  authorized 
to  deliver  coal  for  them,  and  they  did  not  know  of  his  doing  it.  Later,  after 
they  knew  of  the  broken  window,  they  presented  a  bill  for  the  coal.  Held, 
that  by  ratifying  the  acts  of  this  man  they  become  liable  for  his  negligent  acts. 

Fraud  and  Negligence.  —  Fraud  is  one  of  the  wrongs  of  fre- 
quent occurrence  in  the  relation  of  agency,  the  agent  having 
made  false  and  fraudulent  representations  in  carrying  out  his 
principal's  business.  It  is  the  general  holding  that  the  princi- 
pal is  liable  for  the  agent's  fraud  in  the  course  of  the  princi- 
pal's business  and  for  his  benefit. 


172  AGENCY 

The  negligence  of  the  agent  is  among  the  wrongs  for  which 
the  principal  is  liable,  if  such  negligence  was  committed  in  the 
ordinary  discharge  of  the  agency. 

In  Brady  v.  Railroad  Co.,  34  Barb.  (N.Y.)  249,  an  agent  failed  for  four 
days  to  present  a  draft  and  the  party  drawn  on  failed.  Held,  that  the  principal 
was  liable  for  the  negligence  of  his  agent  in  not  presenting  the  draft  in  proper 
time. 

When  the  wrong  is  committed  by  the  agent  in  the  course  of 
his  employment,  and  even  to  benefit  himself  personally  and  not 
his  principal,  some  authorities  hold  that  the  principal  is  never- 
theless liable. 

In  Cobb  V.  Railway  Co.,  2,7  S.C.  194,  an  engineer  willfully  and  unnecessa- 
rily blew  the  whistle  and  frightened  a  horse.  Held,  that  the  railway  company 
was  liable  for  acts  done  by  its  engineer  maliciously,  wantonly,  and  willfully 
while  in  the  exercise  of  his  duties,  whether  in  the  course  of  his  employment 
or  not. 

Others  hold  the  principal  is  not  liable. 

In  Stephenson  v.  Southern  Pacific  Co.,  93  Cal.  558,  a  railway  engineer  inten- 
tionally and  wantonly  backed  his  engine  toward  a  street  car  that  was  crossing 
the  track,  with  the  simple  intent  of  frightening  the  passengers,  without  collid- 
ing with  the  car.  As  a  result  the  plaintiff,  a  passenger,  was  frightened  and 
jumped  from  the  car  and  was  injured.  Held,  that  the  act  of  the  engineer  was 
without  any  reference  to  the  service  for  which  he  was  employed  and  not  for 
the  purpose  of  performing  his  employer's  work,  and  that  the  principal  was  not 
responsible. 

Liability  for  Malicious  Wrongs.  —  But  it  is  held  that  the 
principal  is  not  liable  for  the  malicious  wrongs  or  crimes  of  the 
agent,  unless  he  expressly  authorized  the  same.  There  is  an 
exception  to  this  in  the  case  of  laws  or  statutes  which  are  said 
to  be  in  the  nature  of  police  regulations  designed  to  promote 
the  safety  and  health  of  the  community.  In  cases  of  this  kind 
the  principal  is  liable,  even  though  the  agent  act  directly  con- 
trary to  instructions  and  without  his  knowledge  and  consent. 
The.  laws  regulating  the  speed  of  automobiles  on  the  public 
roads,  and  those  prohibiting  the  selling  of  liquor  on  Sunday  or 
to  children,  may  be  mentioned  as  examples  under  this  head. 

Commonwealth  v.  Kelley,  140  Mass.  441,  has  relation  to  a  statute  which 
prohibited  the  closing  on  Sunday  of  curtains  or  blinds,  so  as  to  obscure  the 


OBLIGATION  OF  AGENT  TO   THIRD  PARTY  173 

interior  of  premises  where  liquor  was  sold.  The  owner  had  given  instruc- 
tions that  they  be  kept  open,  but  the  bartender,  without  his  knowledge,  closed 
them.  Held,  that  the  owner  was  liable.  The  statute  forbids  him  to  do  the 
prohibited  act,  or  permit  it  to  be  done,  and  it  includes  the  acts  of  his  servants 
as  well  as  his  own. 

7.     OBLIGATION   OF  THIRD   PARTY  TO  PRINCIPAL 

It  is  clear  that  the  third  party  is  liable  to  the  principal  for 
contracts  entered  into  with  the  agent,  within  his  authority,  or 
which  are  subsequently  ratified  by  the  principal. 

The  third  party  is  also  liable  to  the  principal  for  moneys  or 
property  obtained  from  the  agent  by  duress  or  fraud;  hence, 
if  an  agent  is  compelled  to  pay  illegal  charges  to  protect  his 
principal's  interest,  the  principal  may  recover  of  the  third 
party. 

The  third  party  may  also  be  liable  to  the  principal  for  fraud 
or  wrong,  or  for  collusion  with  the  agent  to  injure  the  principal. 

Mayor  v.  Lever,  1891,  i  Q.  B.  168,  is  an  English  case  in  which  the 
plaintiff  was  proprietor  of  gas  works.  It  was  the  duty  of  the  company's  man- 
ager to  obtain  and  recommend  bids  for  coal  and  supplies.  Defendant  bribed 
him  to  recommend  his  bid,  and  added  the  price  of  the  bribe  to  the  bid.  In 
an  action  against  them,  it  was  held  that  plaintiff  could  recover  the  damages 
from  the  agent  who  had  accepted  the  bribe,  or  from  the  defendant  who  had 
given  it.     They  were  joint  wrongdoers,  and  could  be  held  jointly  or  severally. 

He  is  also  liable  for  unlawfully  interfering  with  the  agent  in 
the  performance  of  his  duties  as  agent. 

In  Railroad  Co.  v.  Hunt,  55  Vt.  570,  it  was  held,  that  maliciously  to  cause 
the  arrest  of  plaintiffs  engineer  while  running  a  train,  and  then  to  delay  the 
train  and  thereby  damage  the  company,  is  actionable,  and  the  railroad  com- 
pany can  recover  for  such  damages  from  the  person  so  causing  the  arrest. 

8,    OBLIGATION   OF  AGENT  TO  THIRD   PARTY 

When  an  agent  makes  a  contract  on  behalf  of  his  principal, 
he  may  in  certain  cases  bind  himself.  If  he  holds  himself  out 
as  having  authority  to  act  for  a  principal  in  a  transaction  in 
which  he  has  no  such  authority,  he  is  liable  to  the  third  party 
for  the  damages  suffered. 


174  AGENCY 

In  Kroeger  v.  Pitcairn,  loi  Pa.  St.  311,  A,  the  agent  for  an  insurance  com- 
pany, obtained  and  delivered  to  B  a  policy  of  insurance  on  B's  store,  contain- 
ing a  clause  that  no  petroleum  should  be  kept  on  the  premises.  B  told  A  it 
was  necessary  to  keep  a  little,  and  A  assured  him  if  he  kept  only  a  barrel  it 
need  not  be  noted  in  the  policy,  and  was  all  right.  The  store  burned,  and  B 
could  not  recover  because  he  had  a  barrel  of  petroleum.  Held,  A,  the  agent, 
was  liable,  as  he  gave  positive  assurance  in  excess  of  his  authority. 

The  agent  is  also  presumed  to  represent  not  only  that  he  has 
authority,  but  that  his  principal  was  competent  to  give  such 
authority. 

In  the  case  in  which  there  is  no  real  principal,  but  the  one  so 
represented  is  fictitious,  the  agent  himself  becomes  the  principal, 
and  is  liable  as  such. 

Lewis  v.  Tilton,  64  Iowa  220,  held,  an  unincorporated  organization  can  not 
be  a  party  to  a  contract,  and  persons  contracting  in  the  name  of  such  an  or- 
ganization are  themselves  personally  liable  either  as  being  themselves  in  fact 
principals,  or  as  holding  themselves  out  as  agents  for  a  principal  which  never 
in  law  existed. 

In  some  instances,  the  agent  expressly  pledges  his  credit,  and 
of  course  in  such  cases  he  is  liable. 


9.    TERMINATION  OF  THE  RELATION  OF  PRINCIPAL 
AND  AGENT 

The  agency  may  be  terminated  by  limitation,  by  acts  of  the 
parties,  or  by  a  change  in  the  condition  of  the  parties. 

Termination  by  Limitation.  —  If  the  contract  of  agency  is  by 
its  terms  to  continue  for  but  a  limited  time,  the  agency  termi- 
nates when  the  time  expires ;  or  if  the  particular  business  for 
which  the  agency  was  created  has  been  completed,  the  agency 
is  terminated. 

Moore  v.  Stone,  40  Iowa  259.  An  agent  was  employed  to  negotiate  for  the 
purchase  of  certain  land.  He  obtained  the  contract  for  the  conveyance,  the 
first  payment  was  made,  and  the  agent  was  paid  for  his  services.  Held, 
the  agency  was  then  terminated  as  the  object  for  which  the  agency  was  created 
had  been  accomplished.  Here  the  agent,  after  he  was  paid  for  his  services, 
bought  in  the  property  at  tax  sale,  and  plaintiff  sought  to  set  it  aside  on  the 
ground  that  he  was  still  his  agent,  but  as  the  agency  was  held  to  be  termi- 
nated, the  court  refused  to  interfere. 


TERMINATION  OF  AGENCY 


175 


Termination  by  Act  of  the  Parties.  —  Under  certain  conditions 
either  party  may  terminate  the  relation.  This  may  be  done 
by  mutual  agreement,  by  the  principal  revoking  the  agent's 
authority,  or  by  the  agent  renouncing  the  agency. 

Since  the  principal  appoints  the  agent,  and  the  relation  is  one 
of  confidence  for  his  own  protection,  he  has  the  power  to  termi- 
nate it  at  will.  It  is  therefore  the  general  rule  that  the  principal 
may  terminate  the  agent's  authority  at  any  time  and  with  or 
without  good  cause.  This  of  course  gives  the  agent  a  claim  for 
damages  if  the  agency  is  revoked  contrary  to  agreement. 

It  may  be  well  to  note  here  the  distinction  between  the  power 
to  terminate  the  agency  and  the  right  to  terminate  it.  The 
principal  generally  has  the  power,  but  if  it  violates  an  agree- 
ment with  the  agent,  he  does  not  have  the  right  to  so  terminate 
the  agency,  and  he  is  therefore  liable  to  the  agent  for  damages. 

In  Standard  Oil  Co.  v.  Gilbert,  84  Ga.  714,  there  was  a  written  contract  for  one 
year,  fixing  the  agent's  compensation.  This  was  renewed  the  next  year,  and 
from  then  on  was  lived  up  to,  but  nothing  was  said  about  the  agreement.  Held, 
that  there  was  a  tacit  renewal  from  year  to  year,  and  that  the  principal  could 
not,  during  the  year,  deprive  the  agent  of  his  salary  before  the  expiration  of  the 
year.  Though  the  power  of  revocation  existed,  the  right  to  revoke  did  not 
exist. 

The  revocation  of  the  agency  by  the  principal  need  not  be 
made  in  any  formal  way,  but  may  be  by  oral  instructions  or  by 
written  notice.  In  some  cases  it  may  be  implied  by  the  condi- 
tions; as,  when  a  principal  gives  an  agent  authority  to  sell  his 
house,  anr'  before  the  agency  is  executed  it  is  destroyed  by  fire, 
in  which  case  a  revocation  must  be  implied. 

A  revocation  is  binding  only  upon  those  who  have  notice  of 
it.  The  principal  must  therefore  not  only  give  notice  to  the 
agent  but  to  those  who  upon  the  strength  of  the  previous 
authority  are  likely  to  deal  with  him ;  otherwise  he  may  be  held 
for  the  acts  of  the  agent  after  the  revocation. 

There  is  a  class  of  cases  in  which  the  principal  has  no 
authority  to  revoke  the  agency.  This  is  where,  as  it  is  said,  the 
agency  is  coupled  with  an  interest ;  as  when  the  agent  has  an 
interest  in  the  subject-matter  of  the  agency  by  way  of  security. 


1/6  AGENCY 

For  example,  when  a  person  has  possession  of  personal  property 
with  power  to  sell  and  apply  the  proceeds  to  the  payment  of  a 
debt  due  the  agent,  such  a  case  constitutes  a  power  coupled  with 
an  interest. 

In  Knapp  v.  Alvord,  lo  Paige  Ch.  (N.Y.)  205,  a  cabinet  maker  on  going 
abroad,  employed  an  agent  to  carry  on  his  business,  and  gave  him  the  full 
and  entire  control  of  his  property,  with  a  written  power  to  sell  any  or  all  of  the 
furniture  or  stock,  and  apply  the  proceeds  to  the  security  or  payment  of  a  cer- 
tain note,  indorsed  by  said  agent  and  a  third  party,  or  for  any  renewals  upon 
which  the  agent  might  become  liable.  Held,  the  agent  had  a  power  coupled 
with  an  interest  which  survived  the  principal's  death,  and  the  agent  could  sell 
after  such  death. 

As  to  the  rights  of  the  agent  to  renounce  the  agency,  it  seems 
that  he  also  has  the  power  but  not  the  right  to  renounce  at  will. 
And  it  may  be  either  express  or  imphed ;  as,  if  the  agent 
abandons  his  work,  the  principal  may  consider  the  agency  as 
renounced. 

10.     CHANGE   IN   CONDITION   OF  THE   PARTIES 

The  agency  may  also  terminate  by  a  change  in  the  condition 
of  the  parties. 

Death.  —  The  death  of  either  the  principal  or  the  agent  ter- 
minates the  agency  and  it  is  no  longer  binding  on  the  estate  of 
the  deceased  or  the  survivor.  And  in  this  case  no  notice  of  the 
termination  need  be  given  to  third  parties.  The  agency  termi- 
nates upon  the  principal's  death,  and  any  contract  made  there- 
after by  the  agent  is  a  nullity. 

Farmers  Loan  and  Trust  Co.  v.  Wilson,  139  N.Y.  284,  held  that  the  power 
of  an  agent  to  collect  rent  due  his  principal  ceased  upon  the  principal's  death, 
unless  the  agency  was  coupled  with  an  interest.  And  payments  made  thereafter 
do  not  bind  the  principal's  estate,  although  made  in  ignorance  of  his  death. 

Insanity.  —  If  either  the  principal  or  the  agent  become 
insane,  the  effect  is  to  terminate  the  agency,  as  the  principal  is  no 
longer  competent  to  enter  into  a  contract,  and  the  agent,  if  insane, 
is  not  competent  to  carry  out  the  intentions  of  the  principal.  But 
if  the  principal  has  not  been  legally  declared  insane,  persons 
dealing  with  the  agent  in  ignorance  of  his  insanity  are  protected. 


CHANGE  m  CONDITION  OF  THE  PARTIES  177 

Any  other  cause  that  may  render  the  agent  incompetent  to 
carry  out  the  agency  will  also  terminate  the  agency,  as  the  ill- 
ness of  the  agent  or  his  imprisonment. 

Bankruptcy.  —  The  mere  insolvency  of  either  party  does  not 
affect  the  agency,  but  it  will  be  terminated  when  either  party 
becomes  technically  bankrupt,  because  when  a  party  becomes  a 
bankrupt  his  property  passes  out  of  his  hands  and  he  is  unable 
to  carry  out  any  contract  in  reference  to  it.  The  above  rule  does 
not  apply,  however,  when  the  agency  is  coupled  with  an  interest. 
In  the  case  of  the  bankruptcy  of  the  agent  his  authority  ceases 
except  to  perform  some  formal  act  not  involving  the  transfer  of 
any  property. 

Marriage.  —  Under  the  common  law  many  restrictions  were 
placed  about  a  married  woman,  the  control  of  her  property  pass- 
ing to  her  husband.  Consequently,  upon  her  marriage,  any 
contract  of  agency  in  which  she  was  principal  was  dissolved,  as 
she  no  longer  had  the  power  to  deal  with  her  own  property. 
But  every  state  has  passed  laws  enlarging  the  rights  of  married 
women,  and  in  most  instances  giving'  them  full  power  to  own 
and  manage  their  property  and  to  carry  on  their  own  separate 
business.  The  result  is  that  a  married  woman  may  appoint 
agents,  and  the  act  of  marrying  does  not  affect  her  status  in  a 
business  way  and  therefore  has  no  effect  on  the  relation  of 
principal  and  agent,  nor  does  it  dissolve  an  agency  then  existing. 

War.  —  It  is  the  general  law  in  the  different  states  in  this 
country  that  the  existence  of  a  state  of  war  between  the  country 
of  the  principal  and  that  of  the  agent  terminates  the  agency. 
This  is  because  of  the  rule  prohibiting  all  trading  or  commer- 
cial intercourse  between  two  countries  at  war. 

QUESTIONS    ON   AGENCY 

1.  Define  agent.     Define  principal. 

2.  Brown  &  Co.  appointed  one  Gary,  who  was  but  19  years  old,  as  their 
agent  to  buy  certain  goods  for  them.  Later  they  refused  to  take  the  goods, 
setting  up  that  the  agent  was  an  infant  and  the  contract  could  not  be  eo' 
forced.     Was  this  a  good  defense  to  the  contract  ? 

3.  Into  what  two  classes  are  agents  divided  ? 

COM.  LAW  —  I  ^ 


178  AGENCY 

4.  X,  a  farmer,  is  on  his  way  to  town  and  Y,  his  neighbor,  asks  him  to 
bring  back  for  him  a  wheel  for  his  mowing  machine,  which  has  been  broken. 
X  agrees  to  do  this  without  any  compensation.  X  forgets  to  obtain  the  wheel 
and  returns  without  it.  Y  is  unable  to  proceed  with  his  work  and  sues  X  for 
damages.     Can  he  recover  ? 

5.  The  Brown  Medicine  Co.,  by  oral  agreement,  employ  Hartman,  who  is 
an  experienced  agent,  to  travel  for  them,  advertising  and  selling  their  medi- 
cines. By  their  agreement  he  is  to  travel  in  every  state  in  the  Union  and 
is  to  spend  not  less  than  two  weeks  in  each  state.  Hartman  before  com- 
mencing his  work  obtains  a  better  offer  elsewhere,  and  the  company  sue  him 
for  breaking  the  contract.     Can  they  recover  ? 

6.  An  agent  was  authorized  to  sell  a  car  of  coal  for  his  principal  at  $6  a 
ton.  Contrary  to  his  authority  he  sold  it  for  $5  per  ton,  and  received  $120 
down.  The  principal  accepted  the  $120  and  delivered  20  tons  of  coal,  then 
refused  to  deliver  more  until  the  full  price  of  $6  a  ton  was  paid.  Could  the 
principal  refuse  to  deliver  the  balance  under  the  contract  ? 

7.  A  man  running  an  automobile  through  the  country  meets  with  an  acci- 
dent and  is  unable  to  proceed  farther.  Another  party,  who  is  a  stranger  to 
him,  comes  along  with  a  horse  and  wagon  and  the  first  party  asks  to  be  driven 
to  the  nearest  railroad  station,  4  miles  away.  When  he  reaches  there  he 
refuses  to  pay  anything  for  the  services.  Can  the  man  with  the  horse  and 
wagon  recover  anything  ?     If  so,  how  much  ? 

8.  A  party  employs  an  agent  to  sell  certain  shares  of  railroad  stock  for  him 
at  par  value.  The  agent  sells  them  for  $10  a  share  above  par  and  then  remits 
his  principal  the  par  value  of  the  stock.  Can  the  agent  retain  the  balance,  or 
can  the  principal  recover  it  from  him  ? 

9.  Brown  &  Co.,  through  the  Merchants  Bank  of  Rochester,  draw  on  S.  P. 
Kendall,  merchant,  of  New  York  City.  The  Merchants  Bank  forward  the 
draft  to  their  correspondent,  the  Chemical  National  Bank  of  New  York  City. 
This  bank  negligently  fails  to  present  the  draft  for  one  week,  and  in  the  mean- 
time S.  P.  Kendall  becomes  insolvent.  Brown  &  Co.  sue  the  Merchants  Bank 
of  Rochester.     Can  they  recover  ? 

ID.  The  American  Bicycle  Co.  opened  a  store  in  Buffalo  and  placed  X  there 
in  charge  of  the  business.  He  employed  Y  as  head  clerk  at  $20  per  week. 
X  was  expressly  instructed  by  the  company  not  to  pay  any  employee  over  $10 
per  week.     Y  worked  several  weeks  and  sued  for  his  wages.     Could  he  recover  ? 

11.  A  is  driving  on  the  city  streets,  and  through  the  negligence  and  care- 
lessness of  the  street  car  motorman  he  is  run  into  and  injured.  Can  A  recover 
of  the  street  car  company  ? 

12.  An  agent,  without  any  authority  so  to  do,  accepts  a  bill  of  exchange  in 
the  name  of  his  principal,  believing  that  the  principal  will  ratify  his  act.  The 
principal  refuses  to  ratify.     Is  the  agent  liable  ? 

13.  An  agent  was  employed  by  A  to  sell  his  team  of  horses.  In  a  railroad 
accident  the  horses  were  killed.    Did  this  terminate  the  agency  ? 


AGENCY  179 

14.  A  appointed  B,  his  agent,  to  represent  him  for  one  year  at  a  salary  of 
$100  a  month.  At  the  end  of  3  months  he  discharged  him  without  cause. 
Could  A  so  discharge  his  agent,  and  if  so,  was  he  liable  to  B  for  damages  ? 

15.  In  the  above  case  B  deals  with  parties  as  the  agent  of  A  after  he  has 
been  discharged.  The  parties  with  whom  he  deals  have  no  knowledge  of  his 
discharge.     Can  they  hold  A  on  the  agreement  made  by  B  ? 

16.  An  agent  employed  to  sell  goods  for  his  principal,  sells  to  B  the  day 
after  his  principal's  death,  neither  B  nor  the  agent  knowing  that  the  principal 
is  dead.     Can  B  hold  the  principal's  estate  on  the  contract  ? 

17.  If  in  the  above  case  the  principal  had  become  insane,  but  had  not  been 
legally  so  declared,  could  the  principal  have  been  held  ? 


BAILMENT 

I.    IN  GENERAL 

Definition.  —  Bailment  is  defined  as  a  delivery  of  some  chattel 
by  one  party  to  another,  to  be  held  according  to  the  special  pur- 
pose of  delivery,  and  to  be  returned  or  redelivered  when  that 
special  purpose  is  accomplished.  As  we  have  already  seen,  a 
bailment  differs  from  a  sale,  in  that  the  title  to  the  property 
does  not  pass  in  a  bailment.  Practically  every  case  in  which 
one  receives  and  holds  or  handles  the  property  of  another,  with- 
out buying  it  or  receiving  it  as  a  gift,  is  a  case  of  bailment. 
When  one  borrows  or  lends  a  book,  hires  a  horse,  or  sends  a 
package  by  express,  he  is  within  the  rules  of  bailment.  Where 
the  possession  but  not  the  title  has  passed  to  the  vendee,  which 
case  we  have  considered  in  the  chapter  on  sales,  we  find  that 
the  vendee  holds  as  bailee ;  as,  for  instance,  when  property  is 
taken  on  trial. 

Hunt  V.  Wyman,  loo  Mass.  198,  was  an  action  for  the  price  of  a  horse. 
Plaintiff  had  the  horse  for  sale  and  agreed  to  let  defendant  take  it  and  try 
it;  if  he  did  not  like  it  he  was  to  return  it  on  the  night  of  the  day  he  took  it 
in  as  good  condition  as  he  got  it.  Almost  as  soon  as  the  horse  was  delivered 
to  defendant's  servant  it  escaped  from  him  without  the  servant's  fault  and  was 
injured  so  that  the  defendant  could  not  try  it.  The  horse  was  not  returned  in 
the  time  stated.  Held,  to  be  a  bailment  and  not  a  sale,  therefore  the  plaintiff 
could  not  recover. 

In  Nelson  v.  Brown,  44  Iowa  455,  it  was  held  that  a  contract  acknowledging 
the  receipt  of  grain  for  storage,  "  loss  by  fire  and  the  elements  at  the  owner's 
risk,"  with  the  option  to  the  party  receipting  for  it  to  return  grain  of  equal  test 
and  value,  constitutes  a  bailment  which  is  converted  into  a  sale  whenever  the 
bailee  disposes  of  the  grain. 

The  parties  to  a  bailment  are  the  bailor,  or  the  owner  of  the 
chattel  who  delivers  it  over,  and  the  bailee,  who  is  the  party 
vested  with  the  temporary  custody  of  the  chattel. 

180 


IN  GENERAL  l8i 

Classification.  —  Bailments  are  generally  classified  according 
to  the  Roman  law  under  five  heads. 

1.  Deposit;  a  bailment  of  goods  to  be  kept  by  the  bailee 
gratuitously  for  the  benefit  of  the  bailor. 

2.  Mandate ;  a  delivery  of  goods  to  the  bailee  who  is  to  do 
something  to  them  gratis. 

3.  Loan  for  use ;  a  loan  of  personal  property  for  the  benefit 
of  the  bailee  without  recompense. 

4.  Pledge  or  pawn  ;  a  bailment  as  security  for  a  debt. 

5.  Hiring,  which  is  the  loaning  of  a  chattel  for  a  considera- 
tion or  reward. 

Another  and  more  practical  division  of  the  subject  of  bailment 
is  made  according  to  the  benefit  or  recompense  as  follows :  — 

1.  Bailment  for  the  benefit  of  the  bailor ;  deposit  and  mandate. 

2.  Bailment  for  the  benefit  of  the  bailee ;  loan  for  use. 

3.  Bailment  for  the  benefit  of  both  the  bailor  and  bailee; 
pledge  and  hiring. 

The  last  Bailment,  for  the  mutual  benefit  of  both  parties,  is 
again  classified  as  ordinary  and  exceptional,  the  exceptional 
bailments  being  those  of  postmaster,  innkeeper,  and  common 
carrier.  All  other  cases  of  bailment  for  mutual  benefit  of  bailor 
and  bailee  are  ordinary  bailments. 

Degrees  of  Diligence  and  Care.  —  In  all  cases  of  bailment  a 
certain  degree  of  diligence  or  care  is  required  of  the  bailee.  A 
lack  of  the  required  diligence  or  care  is  termed  neghgence  and 
renders  the  bailee  liable. 

By  the  early  authorities  the  diligence  or  care  required  of  the 
bailee  was  classified  into  degrees,  and  to  a  certain  extent  this 
division  is  still  adhered  to.  The  absence  of  the  required  dili- 
gence renders  one  liable  for  negligence.  Where  the  bailment 
is  for  the  benefit  of  the  bailor  alone,  no  benefit  nor  remunera- 
tion accruing  to  the  bailee,  it  is  not  expected  nor  required  of 
the  bailee  that  he  shall  exercise  the  degree  of  care  or  diHgence 
necessary  in  a  case  in  which  he  is  paid  for  his  services.  So 
it  is  said  he  is  bound  to  exercise  slight  diligence  toward  the 
property  in  his  care  and  is  liable  for  gross  negligence. 

In  the  case  of  a  bailment  for  the  benefit  of  both  parties,  a 


1 82  BAILMENT 

benefit  accrues  to  the  bailee  and  a  greater  degree  of  diligence 
is  demanded  of  him  than  in  the  former  case,  therefore  it  is 
required  that  he  exercise  ordinary  diligence  and  he  is  liable  for 
ordinary  negligence.  The  bailment  for  the  sole  benefit  of  the 
bailee,  being  without  any  benefit  to  the  bailor,  imposes  upon  the 
bailee  a  greater  degree  of  diligence  than  in  either  of  the  other 
cases,  and  it  is  said  that  great  diligence  is  exacted  of  him  while 
he  is  answerable  for  even  slight  negligence. 

Ordinary  care  is  defined  to  be  the  care  which  persons  of  ordi- 
nary prudence  under  like  circumstances  are  wont  to  bestow  upon 
their  own  property  of  the  like  description.  Slight  care  or  dili- 
gence is  something  less  than  ordinary  care,  yet  not  amounting 
to  an  utter  disregard  of  the  property.  It  may  be  said  to  be  the 
care  that  might  be  exercised  by  a  very  careless  person.  Great 
care  or  diligence,  on  the  other  hand,  is  that  which  would  be 
exercised  under  similar  circumstances  by  a  more  than  ordinarily 
prudent  and  careful  person. 

In  First  National  Bank  v.  Ocean  National  Bank,  60  N.Y.  278,  plaintiff 
deposited  bonds  in  defendant's  vaults  for  safe  keeping  and  defendant  charged 
nothing  therefor.  The  vault  was  burglarized  and  the  bonds  stolen.  The 
court  held  that  a  gratuitous  bailee  is  liable  only  for  gross  negligence  and  is 
not  bound  to  take  any  special  or  extraordinary  measures  for  the  security  of 
the  property  intrusted  to  him. 

In  Mariner  v.  Smith,  5  Heisk.  (Tenn.),  203,  Smith  left  $9cx>  m  gold  at  the 
counting  house  of  Mariner  &  Curtis  to  be  sold  if  50  per  cent  premium  could  be 
had.  The  gold  was  placed,  in  the  presence  of  Smith,  in  the  safe  of  Mariner  & 
Curtis  where  the  firm  kept  their  own  money.  The  safe  was  afterwards  broken 
open  and  the  gold,  as  well  as  the  money  belonging  to  Mariner  &  Curtis,  was 
taken.  The  court  held  that  the  question  as  to  whether  the  bailment  was  for 
reward  or  not  depended  upon  the  intention  and  contract  of  the  parties.  The 
liability  of  a  bailee  without  reward  is  to  be  determined  by  his  bona  fide  per- 
formance of  the  fairly  understood  terms  of  the  contract,  which  will  be  ascer- 
tained by  the  express  contract  explained  by  the  surrounding  circumstances,  or 
by  the  failure  to  perform  the  terms  of  the  contract  as  it  was  understood  by  the 
parties  at  the  time. 

Besides  the  degree  of  care  or  diligence  that  is  demanded  of  the 
bailee,  the  law  requires  that  he  act  honestly  and  in  good  faith. 
He  must  not  abuse  his  trust  nor  sell,  pledge,  or  otherwise  deal 
with  the  property  in  his  hands  as  though  he  were  the  owner. 


BAILMENT  FOR   THE  BAILOR'S  SOLE  BENEFIT       183 

Tortious  Bailee.  —  In  the  case  of  a  tortious  bailee,  that  is,  one 
who  holds  the  possession  of  the  property  through  an  unlawful 
or  wrongful  act,  as  theft,  trespass,  and  fraud,  or  having  received 
it  in  a  rightful  way  misappropriates  it  or  applies  it  to  a  use  other 
than  that  intended,  he  is  liable  to  account  absolutely  for  the  prop- 
erty, and  although  it  may  be  injured  or  lost  while  in  his  posses- 
sion, but  without  his  fault,  he  must  nevertheless  account  for  it. 

A  thief  who  steals  a  horse,  and  while  driving  it  is  run  into  by 
a  runaway  team  which  kills  the  horse,  is  liable  for  the  value  of 
the  horse,  although  he  was  guilty  of  no  negligence.  Or,  if  a 
man  hires  a  horse  to  drive  to  Albany  and  instead  goes  to  Troy, 
and  on  the  way  the  horse  is  injured  without  the  fault  of  the 
bailee,  still  he  is  absolutely  liable. 

In  Fisher  v.  Kyle,  27  Mich.  454,  defendant  hired  a  horse  of  plaintiff  to 
drive  to  a  certain  place.  He  drove  beyond  the  place  stated,  and  the  horse  fell 
dead  while  being  driven.  The  defendant  was  held  liable  for  the  value  of  the 
horse.  A  person  who  hires  a  horse  for  a  specific  journey  and  drives  him 
beyond  that  journey  takes  upon  himself  all  the  consequences  of  such  addi- 
tional drive,  and  if  the  horse  dies  while  being  so  driven,  the  hirer  is  liable. 

Liability  Varied  by  Contract.  —  As  a  general  rule  the  parties 
to  a  bailment  may  by  contract  vary  the  rights  or  liabilities  of 
the  parties,  making  the  liability  of  the  bailee  either  greater  or 
less  than  it  would  otherwise  be,  except  that  the  law  will  not 
allow  the  bailee  to  be  exempt,  even  by  contract,  for  the  conse- 
quences of  his  own  willful  misconduct. 

In  Archer  v.  Walker,  38  Ind.  472,  A  and  B  were  partners  in  the  banking 
business.  To  enable  the  firm  to  draw  sight  drafts  on  New  York  they  bor- 
rowed from  B  a  number  of  U.  S.  bonds  and  deposited  them  in  New  York  as 
collateral  security  against  overdrafts.  The  firm  expressly  agreed  in  writing 
that  the  bonds  were  "to  be  returned  or  accounted  for  to  B."  The  bonds  were 
stolen  from  the  bailee  in  New  York.  Held,  that  the  firm  was  liable  to  B  for 
the  loss. 

2.     BAILMENT  FOR  THE  BAILOR'S  SOLE   BENEFIT 

Deposit  and  Mandate.  —  This  class  of  bailment  arises  fre- 
quently in  everyday  life.  Every  undertaking  of  a  friend  or 
neighbor  to  hold  or  convey  an  article  of  personal  property  gra- 
tuitously and  as  a  favor  comes  under  this  class.     A  man  may 


1 84  BAILMENT 

gratuitously  take  the  chattel  belonging  to  another  to  keep  it  in 
his  custody.  To  illustrate,  A  stores  B's  wagon  in  his  barn  gra- 
tuitously ;  or  he  takes  it  to  perform  some  work  upon  it,  as  to 
paint  it  without  charge  ;  or  it  may  be  he  carries  it  from  one  place 
to  another,  as  to  take  B's  wagon  home  for  him.  A  bailment  for 
the  bailor's  benefit  may  come  under  any  one  of  these  three 
classes,  or  it  may  combine  two  or  all  of  them. 

Two  of  the  divisions  of  the  Roman  law  are  included  under 
this  head.  They  are  deposit,  which  is  the  placing  of  a  chattel 
with  the  bailee  to  be  kept  by  him  without  pay,  and  mandate, 
which  is  the  bailment  of  a  chattel  upon  which  the  bailee  is  to  do 
something  gratuitously. 

Liability  of  Bailee.  —  An  agreement  by  the  bailee  to  carry 
out  the  gratuitous  bailment,  as  we  have  seen,  can  not  be  enforced 
because  of  the  lack  of  consideration,  but  when  the  bailee  receives 
the  property  and  carries  out  the  bailment,  he  is  bound  to  do  it 
with  care,  and  he  will  be  liable  for  gross  negligence  or  for  wrong- 
ful acts  in  relation  thereto.  The  act  of  the  bailor,  in  surrender- 
ing  the  possession  of  the  chattel  upon  the  faith  of  the  bailee's 
undertaking,  furnishes  sufficient  consideration.  A  person  who 
finds  property  and  takes  it  into  his  possession  is  a  gratuitous 
bailee,  and  is  bound  to  care  for  it  as  such. 

It  is  often  a  difficult  question  to  determine  whether  it  is  a 
gratuitous  bailment  or  a  bailment  for  the  mutual  benefit  of  the 
parties,  that  is,  whether  or  not  the  bailee  is  entitled  to  compen- 
sation. The  original  intent  of  the  parties  is  the  test.  If  the 
bailee  receives  the  chattel  in  the  usual  course  of  his  business, 
and  business  usage  and  his  ordinary  method  of  dealing  give 
him  the  right  to  demand  compensation,  the  bailment  is  net 
considered  gratuitous,  even  though  nothing  was  said  as  to 
compensation. 

tPatttson  V.  Syracuse  National  Bank,  4  T.  &  C.  (N.Y.)  96,  was  an  action  to 
recover  the  value  of  bonds  stolen  from  the  defendant's  bank,  where  they  had 
been  deposited  by  plaintiff  for  safe  keeping.  Nothing  was  said  about  com- 
pensation at  the  time  of  the  deposit.  Held,  that  if  the  defendant  had  the 
right  to  demand  compensation  by  its  course  of  dealing  with  depositors,  the 
bailment  was  not  gratuitous.  The  degree  of  diligence  required  of  defendant 
depended  upon  whether  or  not  the  bctilmeqt  was  gratuitous, 


BAILMENT  FOR   THE  BAILOR'S  SOLE  BENEFIT       185 

But  if  the  bailee  undertakes  the  service  for  a  near  relative  or 
personal  friend,  or  out  of  mere  charity  or  favor,  and  if  the  trust 
puts  him  to  but  little  trouble  and  the  bailment  is  out  of  his  usual 
course  of  business,  it  is  presumed  to  be  without  compensation. 

In  Dart  v.  Lowe,  5  Ind.  131,  plaintiff,  a  merchant  in  Peru.  Ind.,  being  about 
to  go  to  Cincinnati,  had  placed  in  his  hands  by  Thayer,  another  merchant,  $81 
with  which  to  buy  goods  for  Thayer.  When  Thayer  handed  plaintiff  the 
money  he  remarked  that  he  would  rather  pay  him  lor  his  trouble  than  go 
himself.  To  this  plaintiff  made  no  reply.  This,  with  other  money,  was  stolen 
from  plaintiff  on  his  way  and  through  no  gross  negHgence  on  his  part.  Plaintiff 
bought  goods  on  credit  for  Thayer  and  charged  him  nothing  for  his  services 
as  buyer.  The  question  arose  as  to  whether  it  was  a  bailment  for  hire  or  a 
gratuitous  bailment.  The  court  held  that  to  render  the  bailee  liable  for  negli- 
gence as  a  bailee  for  reward  when  he  is  acting  without  the  scope  of  his 
ordinary  occupation,  it  must  be  expressly  proved  that  he  was  to  receive  a 
compensation.  The  court  further  held  that  when  the  bailment  is  for  the  sole 
benefit  of  the  bailor,  the  law  requires  only  slight  diligence  and  makes  him 
liable  only  for  gross  negligence. 

Bailment  through  an  Agent.  —  Either  party  to  a  contract  of 
bailment  may  act  through  an  agent,  and  delivery  to  the  agent  of 
the  bailee  is  delivery  to  the  bailee. 

Degree  of  Care  Necessary.  —  In  this  class  of  bailment,  as  we 
have  seen,  only  the  lowest  degree  of  care  and  diligence  is 
required  of  the  bailee ;  that  is,  slight  care,  and  he  is  not  held 
liable  for  loss  or  injury  unless  guilty  of  gross  negligence,  as  was 
held  in  Dart  v.  Lowe. 

Grijgath  V.  Lipperwick,  28  Ohio  St.  388,  was  an  action  to  recover  the  value  of 
certain  government  bonds,  deposited  by  plaintiff  with  defendants  as  gratuitous 
bailees  and  stolen  from  defendant's  banking  house.  The  bonds,  when  de- 
posited, were  in  a  tin  box,  the  key  of  which  was  retained  by  plaintiff.  Defend- 
ants had  a  small  burglar  proof  safe  in  which  they  kept  similar  bonds  of  their 
own  and  other  depositors,  but  plaintiff's  and  similar  bonds  of  another  depositor 
were  kept  outside,  the  other  depositor  consenting  that  his  should  be  so  kept. 
Held,  to  be  a  question  for  the  jury  as  to  whether  or  not- this  was  gross  negli- 
gence. Good  faith  generally  requires  that  such  bailee  should  keep  the  goods 
intrusted  to  him  with  as  much  care  as  he  ordinarily  keeps  his  own  of  the  same 
kind,  and  he  should  also  keep  them  with  such  degree  of  care  as  would  be 
reasonable,  considering  the  nature  of  the  goods  and  the  circumstances  of  the 
bailment. 

McKay  v.  Hamblin,  40  Miss.  472,  held,  that  when  there  is  no  contract  for 


1 86  BAILMLNT 

the  safe  keeping  of  property  and  no  compensation  agreed  to  be  paid  for  the 
custody  of  the  same,  the  party  in  possession  is  a  mere  depositary,  and,  in  the 
event  of  loss,  is  liable  only  for  gross  neglect. 

It  is  sometimes  stated  that  the  rule  requires  that  the  same 
degree  of  care  be  exercised  that  a  man  bestows  upon  his  own, 
and  this  is  undoubtedly  true  when  the  bailor  knows  the  bailee's 
habits  and  the  place  or  manner  in  which  he  is  to  keep  or  handle 
the  goods,  for  when  he  knows  these  conditions,  the  law  presumes 
that  he  agrees  that  the  goods  shall  be  so  treated. 

Coggs  V.  Bernard,  2  Ld.  Raymond  909,  was  an  early  English  case  that  was 
decided  about  the  year  1700.  The  defendant,  it  seemed,  undertook  without 
compensation  to  move  some  casks  of  brandy  from  one  place  to  another,  but  by 
his  carelessness  a  quantity  was  spilt.  It  was  held  that  if  a  man  undertakes  to 
carry  goods  safely  and  securely  he  is  responsible  for  any  damages  they  may 
sustain  in  the  carriage  through  his  negligence,  although  he  is  not  a  common 
carrier  and  is  to  have  nothing  for  his  services. 

In  Spooner  v.  Mattoon,  40  Vt.  300,  plaintiff  and  defendant  were  soldiers  in 
camp,  occupying  tents  10  rods  apart.  Plaintiif  had  considerable  money,  and 
fearing  it  might  not  be  safe,  left  it  with  his  friend,  the  defendant,  without 
expectation  of  reward,  for  safe-keeping.  For  two  nights  he  so  left  it,  and 
«ame  for  it  in  the  morning.  On  the  third  morning  he  did  not  call  for  it,  and 
defendant  started  for  plaintifTs  tent  with  the  money.  He  put  it  under  his  arm 
inside  of  his  vest,  so  that  the  pocketbook  would  not  be  seen.  It  slipped  out 
and  was  lost.  Held,  that  the  defendant  was  not  guilty  of  gross  negligence, 
so  was  not  liable. 

No  absolute  rule  can  be  laid  down  as  to  just  how  a  gratuitous 
bailee  must  care  for  the  chattel  in  his  charge.  The  circum- 
stances of  the  case  control ;  that  is,  different  care  would  be 
required  of  the  person  who  receives  a  watch  or  a  valuable  vase, 
from  that  expected  of  the  person  who  receives  a  wagon  or  a  load 
of  stone.  It  is  said  that  a  gratuitous  bailment  seldom  demands 
skilled  labor  or  care,  and  the  gratuitous  bailee  is  excused  from 
the  results  of  inevitable  accident,  accidental  fire,  etc. 

Use  of  Property.  —  In  bailments  of  this  class  the  question  arises 
as  to  whether  or  not  the  gratuitous  bailee  may  use  the  thing  bailed 
to  him.  Clearly,  he  can  not  make  any  use  of  it  except  for  the 
bailor's  benefit,  otherwise  the  bailment  would  not  be  included  in 
this  class.  When  the  bailee  accepts  the  custody  of  an  animal, 
he  undertakes  to  feed  and  care  for  it.     Proper  care  would  require 


BAILMENT  FOR  BAILEE'S  SOLE  BENEFIT  187 

him  to  drive  a  horse  for  exercise,  to  milk  a  cow,  etc.,  but  the 
profits  derived  from  the  use  of  the  animal  in  this  class  of  bail- 
ment  go  to  the  bailor.  The  bailee  has  a  right  to  incur  such 
expenses  in  caring  for  the  thing  bailed  as  are  necessary. 

In  Devalcourt  v.  Dillon,  12  La.  An.  672,  A  deposited  in  the  hands  of  B  mer- 
chandise to  be  sold,  the  proceeds  to  be  applied  on  a  debt  which  he  owed  to  B. 
Held,  that  whatever  useful  and  necessary  expenses  B  incurred  in  fulfilling  the 
bailment  were  chargeable  to  A. 

Termination.  —  This  class  of  bailment  is  terminated  either  by 
the  accomplishment  of  the  purpose  of  the  bailment  or  by  the 
express  act  of  either  party.  The  bailee  may  surrender  the  arti- 
cle bailed,  and  so  terminate  the  relation,  or  the  bailor  may  make 
a  demand  and  recover  the  chattel.  When  the  bailment  is  for 
the  purpose  of  accomplishing  some  act,  as  the  delivery  of  a 
chattel  from  one  place  to  another,  the  bailee,  after  undertaking 
the  bailment,  must  accomplish  it  with  at  least  slight  care,  or  be 
responsible  for  breach  of  contract.  But  by  mutual  assent,  the 
bailment  may  be  terminated  at  any  time.  The  delivery  of  the 
identical  chattel  is  necessary.  If  it  is  in  a  bettered  condition, 
the  bailee  derives  no  benefit ;  and  if  in  worse,  it  is  not  his  loss 
unless  due  to  his  gross  negligence.  If  it  is  lost,  he  is  liable  in 
so  far  as  the  loss  is  due  to  his  lack  of  slight  diligence  or  care. 


3.    BAILMENT  FOR   BAILEE'S    SOLE  BENEFIT 

Definition.  —  This  class  of  bailment  consists  of  the  gratuitous 
loan  for  use.  The  bailee  is  what  we  call  in  ordinary  language, 
the  "borrower."  When  a  man  lends  his  lawn  mower  or  his 
bicycle  to  a  friend  to  use  and  afterwards  to  be  returned,  the  loan 
is  a  bailment  for  the  bailee's  sole  benefit. 

The  bailor  must  voluntarily  give  the  possession  of  the  article 
to  the  bailee  without  exacting  any  recompense  for  its  use.  This 
bailment  must  be  distinguished  from  the  loan  of  something  that 
is  to  be  consumed  and  afterwards  to  be  paid  back  in  kind,  as 
flour  or  grain,  which  was  under  the  Roman  law,  miituiim,  or  a 
"  loan  for  consumption,"  but  which  is  in  fact  no  bailment  at 


iSg  BAILMENT 

all,  but  a  barter ;  that  is,  the  exchange  of  the  particular  property 
for  another  of  a  like  kind. 

The  loan  may  be  for  a  definite  period  or  at  the  will  of  the 
bailor,  who  may  terminate  it  whenever  he  pleases. 

In  Clapp  V.  Nelson,  12  Texas  370,  plaintiff  sued  to  recover  the  possession 
of  a  wagon  and  two  mules  wliich  lie  liad  loaned  to  tlie  defendant  for  '^a  day 
or  two,"  but  which  defendant  had  neglected  to  return.  Held,  that  when  prop- 
erty is  loaned  for  a  definite  period  or  for  a  day  or  two  or  a  week  or  two,  if  it 
is  not  returned  at  the  end  of  the  longer  period,  the  lender  can  bring  an  action 
for  it  without  first  making  a  demand  for  the  property. 

Responsibility  of  Bailee.  —  The  bailee  being  the  only  one  bene- 
fited, the  duty  devolves  upon  him  to  exercise  the  highest  degree 
of  care  or  dihgence  in  the  use  of  the  chattel,  or,  as  it  is  expressed, 
he  is  bound  to  use  great  dihgence,  and  is  responsible  for  every 
loss  which  is  occasioned  by  even  slight  negligence. 

In  Hagebush  v.  Ragland,  78  111.  40,  defendant  borrowed  a  horse  of  plaintiff 
to  drive  on  a  visit  to  his  brother,  and  when  the  horse  was  returned  it  was  so 
injured  that  it  died.  The  court  held  the  defendant  liable,  and  said  that  when 
an  animal  is  borrowed  without  hire,  the  borrower  is  bound  to  take  extraordi- 
nary care  of  it,  and  if  a  failure  of  such  duty  results  in  injury  to  the  lender,  the 
borrower  will  be  liable. 

Bennett  v.  O'Brien,  yj  III.  250,  held,  that  the  loan  of  domestic  animals 
necessarily  involves  their  keeping,  and  the  expense  thus  incurred  by  the 
borrower  is  not  a  compensation  to  the  lender  which  changes  the  gratuitous 
character  of  the  bailment.  In  a  suit  brought  by  the  lender  against  the  bor- 
rower of  a  horse  which  dies  in  the  possession  of  the  latter,  it  devolves  upon 
the  borrower  to  show  that  he  exercised  extraordinary  care  toward  the 
property  borrowed. 

Wood  V.  McClure,  7  Ind.  155,  held,  that  the  borrower  is  to  use  extraordi- 
nary diligence  in  regard  to  property  loaned  to  him,  and  is  responsible  for  the 
slightest  neglect ;  but  if  the  property  perish,  or  is  lost  or  damaged,  without 
any  blame  or  neglect  on  his  part,  the  owner  must  sustain  the  loss. 

Great  diligence,  then,  is  such  as  one  more  than  ordinarily 
careful  would  bestow  upon  his  property  under  like  circum- 
stances. Such  a  high  degree  of  care  being  required  of  the  gra- 
tuitous bailee,  he  is  held  strictly  to  the  terms  of  the  bailment, 
and  when  he  deviates  from  these  terms  he  is  liable  for  the  loss 
or  damage  ensuing. 


BAILMENT  FOR  BAILEE'S  SOLE  BENEFIT  189 

In  Martin  v.  Cuthbertson,  64  N.C.  328,  plaintiff  borrowed  a  horse  to  ride 
to  the  residence  of  one  Cline  and  return  next  day,  but  instead  he  rode  a  mile 
and  a  half  farther  and  in  a  different  direction.  The  horse  died  during  its 
absence  on  the  third  day  after  leaving  home.  It  was  admitted  that  there  was 
no  negligence.  Held,  that  without  regard  to  the  question  of  negligence  the 
bailee  is  liable  for  any  injury  which  results  from  his  departure  from  the  con- 
tract. 

But  where  the  borrower,  while  using  the  chattel  within  the 
terms  of  the  bailment,  encounters  some  accident  whereby  the 
thing  loaned  is  injured  or  lost  without  even  slight  negligence 
on  his  part,  he  is  not  liable. 

Watkins  v.  Roberts,  28  Ind.  167,  was  an  action  for  the  value  of  a  horse 
loaned  by  plaintiff  to  defendant.  The  defense  was  that  while  defendant,  who 
had  borrowed  the  horse  to  go  to  a  certain  place  and  return,  was  on  his  way, 
and  without  any  fault  or  negligence  on  his  part,  he  was  met  by  some  cavalry 
soldiers  of  the  United  States,  who  forcibly  took  the  horse  from  him.  It  was 
held  to  be  a  good  defense,  and  rendered  the  defendant  free  from  liability. 

If  the  chattel  is  injured  or  destroyed  by  inevitable  accident  or 
by  fire,  or  if  it  is  an  animal  and  dies  a  natural  death,  the  loss 
will  not  fall  upon  the  bailee  unless  he  is  in  fault. 

In  Better  v.  Schultz,  44  Mich.  529,  plaintiff  loaned  a  flag  to  defendant. 
After  it  was  hoisted  a  hailstorm  came  up  and  damaged  it.  Held,  that  in  the 
absence  of  proof  that  defendant  had  failed  to  take  due  care  of  the  flag  he  was 
not  liable.  A  borrower  of  property  is  not  an  insurer,  even  though  it  be  gra- 
tuitously loaned. 

Use  of  Property.  —  As  we  have  seen,  this  class  of  bailment 
carries  with  it  the  right  to  use  the  chattel,  subject  to  such  con- 
ditions and  limitations  as  the  bailor  may  be  reasonably  supposed 
to  have  made.  Such  expense  as  may  be  necessary  to  preserve 
the  chattel  while  in  use  is  to  be  paid  by  the  borrower,  as  feeding 
and  sheltering  a  horse  or  other  domestic  animals.  But  any 
extraordinary  expense  which  wholly  preserves  the  property  for 
the  owner  may  properly  be  chargeable  to  the  bailor. 

As  soon  as  the  bailment  is  ended,  either  by  the  expiration  of 
the  term,  the  act  of  the  bailor,  or  the  mutual  agreement  of  the 
parties,  the  borrower  must  immediately  deliver  the  property  to 
the  bailor  or  his  order. 


190  BA/LMEIVT 

4.     BAILMENT   FOR   MUTUAL  BENEFIT 

Definition. — This  class  of  contract  differs  from  those  just 
considered  in  that  the  benefits  to  be  derived  are  mutual  instead 
of  being  confined  to  one  side.  It  is  a  business  transaction  rather 
than  an  act  of  favor  or  friendship. 

Bailments  of  this  class  may  consist  of  (i)  the  hired  service 
about  a  chattel,  (2)  the  hired  use  of  a  chattel,  or  (3)  pledge  or 
pavirn. 

In  mutual  benefit  bailments  it  is  essential  that  there  be  a  rec- 
ompense for  the  use  of  the  chattel  or  for  the  work  to  be  be- 
stowed upon  it.  The  amount  may  be  definitely  fixed  or,  in  the 
absence  of  an  agreed  price,  it  may  be  such  as  shall  be  determined 
to  be  just  and  reasonable. 

In  Chamberlin  v.  Cobb,  32  Iowa  161,  plaintiff  owned  a  horse  for  which  he 
had  no  use,  and,  to  avoid  the  expense  of  keeping  it,  requested  defendant  to 
take  it  and  do  his  work  witli  it  in  consideration  of  its  feed  and  keep.  Held, 
to  be  not  a  mere  gratuitous  loan,  under  which  defendant  would  be  required  to 
exercise  extraordinary  care,  but  a  contract  for  the  mutual  benefit  of  both 
parties,  under  which  defendant  was  required  to  exercise  ordinary  care  in  the 
keeping  and  care  of  the  animal. 

Like  all  other  bailments,  the  possession  of  the  chattel  must 
be  intrusted  to  the  bailee,  and  as  in  other  contracts,  the  parties 
must  be  competent  to  contract  and  the  object  of  the  bailment 
must  be  lawful. 

Hired  Service  about  a  Chattel.  —  In  the  hired  service  about  a 
chattel  the  bailment  may  be  for  the  purpose  of  having  the  chattel 
stored  or  cared  for,  or  it  may  be  for  the  purpose  of  having  work 
performed  upon  it,  or  for  the  purpose  of  having  it  carried  from 
place  to  place.  Among  the  hired  custodians  who  store  or  care 
for  property  are  safe  depositaries,  who  for  a  consideration  keep 
valuables  in  a  safe  place,  and  warehousemen,  who  for  a  certain 
charge  keep  goods  and  merchandise  in  storage.  The  hired  work 
upon  a  chattel  includes  that  of  the  wagon-maker  who  takes  a 
wagon  to  repair  it,  of  the  watchmaker  who  takes  a  v/^atch  to  adjust 
it,  and  of  other  classes  of  mechanics  who  receive  chattels  to  be- 
stow labor  of  different  kinds  upon  them.     The  hired  carriage  of 


BAILMENT  FOR  MUTUAL  BENEFIT  191 

a  chattel  may  be  performed  by  a  private  carrier,  who  for  hire 
undertakes  to  transport  a  particular  chattel,  or  the  public  or 
common  carrier  who  follows  as  a  business  the  conveying  of 
chattels  or  persons.  Private  carriers  are  within  the  usual  rules 
of  a  mutual  benefit  bailment,  while  public  carriers,  including  rail- 
roads and  express  companies,  come  within  a  special  class,  having 
exceptional  liabilities  imposed  upon  them  by  law,  which  will  be 
discussed  later. 

Pennewill  v.  Cullen,  5  Harr.  (Del.)  238,  was  an  action  against  tlie  owner 
of  a  boat,  for  damage  to  a  load  of  corn  which  was  spoiled  by  water  getting 
into  it.  Defendant's  boat  was  generally  employed  to  carry  coal  for  a  certain 
party  from  Philadelphia  to  New  York  and  on  returning  to  bring  lime  to 
defendant.  Three  or  four  times  the  boat  had  carried  loads  for  other  par- 
ties. The  question  was  as  to  whether  or  not  the  defendant  was  liable  as  a 
common  carrier.  The  court  held  the  test  to  be  whether  the  defendant  held 
himself  out  to  the  public  as  engaged  in  the  business  of  a  common  carrier.  It 
was  not  necessary  that  his  trips  should  be  regular  between  the  same  places. 
If  engaged  in  the  business  of  carrying  grain  for  others  generally,  to  and  from 
any  point,  he  was  a  common  carrier.  But  if  he  kept  his  vessel  for  his  own 
use,  he  would  not  be  liable  as  a  common  carrier,  even  though  he  chartered  or 
hired  it  to  another  by  special  agreement. 

In  the  bailment  for  hire  the  degree  of  care  or  diligence  re- 
quired of  the  bailee  is  said  to  be  ordinary  diligence,  or  such  care 
as  a  prudent  person  exercises  toward  his  own  property  under 
like  circumstances.  He  is  therefore  liable  for  loss  or  injury  to 
the  chattel  caused  by  ordinary  negligence  or,  in  other  words,  a 
failure  to  bestow  ordinary  care  and  diligence. 

In  Jones  v.  Morgan,  90  N.Y.  4,  plaintiff  stored  certain  household  goods  in 
a  building  owned  by  defendant  and  rented  by  him  for  that  purpose.  Plaintiff 
had  a  room  allotted  to  her.  Most  of  the  goods  were  stolen  by  employees  in 
charo-e  of  the  buildings.  Held,  that  the  defendant  was  a  bailee  for  hire  and 
bound  to  exercise  ordinary  care  and  prudence.  The  plaintiff  was  given  a 
judgment. 

In  Maynard  v.  Buck,  100  Mass.  40,  defendant  was  a  drover  who  received 
cattle  to  drive  from  Brighton  to  Worcester,  for  hire.  He  received  two  head 
of  cattle  from  plaintiff  and  while  driving  them  the  herd  became  frightened  by 
a  train  and  the  two  wandered  away.  Held,  that  the  defendant  was  bound  to 
use  the  same  care  in  regard  to  the  cattle  that  men  of  ordinary  prudence  would 
exercise  over  their  own  property  under  the  same  circumstances.  The  plaintiflF 
recovered. 


192  BAILMENT 

While  the  chattel  is  in  the  possession  of  the  workman  eni' 
ployed  in  working  upon  it,  if  it  is  destroyed  by  inevitable  acci- 
dent or  through  some  natural  cause  and  without  any  fault  upon 
his  part,  he  will  not  be  liable. 

A  greater  degree  of  care  is  required  of  the  safe  depositary 
who  stores  jewelry  and  valuables  than  is  required  of  a  cattle 
keeper.  So  the  exact  care  and  precaution  required  of  the  bailee 
depends  much  upon  the  circumstances  of  the  particular  case. 

Morehead  v.  Brown,  51  N.C.  367,  was  a  case  in  which  a  bailee,  to  store  and 
keep  cotton  for  hire,  permitted  it  to  remain  with  the  roping  off,  the  bagging 
torn,  and  the  under  portion  in  the  mud  and  water  so  that  it  became  stained 
and  much  of  it  was  destroyed.  The  court  held  that  there  was  a  want  of 
ordinary  care  and  the  defendant  was  liable. 

A  keeper  of  horses  who  carelessly  leaves  doors  or  gates  open 
so  that  the  animals  are  lost  or  injured  can  be  held  liable. 

In  Swann  v.  Brown,  51  N.C.  150,  defendant,  a  keeper  of  a  livery  stable, 
permitted  the  owner  of  certain  horses  to  go  into  the  stable  at  a  late  hour  of 
the  night  and  take  them  out,  in  consequence  of  which,  a  horse  belonging  to 
plaintiff  made  his  escape  and  was  lost  either  by  passing  out  with  the  other 
horses  or  afterwards,  as  the  door  was  left  partly  open.  Held,  that  the  de- 
fendant was  guilty  of  lack  of  ordinary  care  and  was  liable.  Ordinary  care 
was  said  to  be  that  degree  of  care  which,  under  the  same  circumstances,  a 
person  of  ordinary  prudence  would  take  of  the  particular  thing  were  it  his 
own. 

When  the  bailee  is  to  perform  some  work  upon  the  chattel,  he 
must  exercise  such  skill  as  a  prudent  workman  of  the  same  class 
would  bestow  upon  a  similar  undertaking.  And  for  a  failure  to 
exercise  ordinary  skill  he  will  be  liable  as  for  a  lack  of  ordinary 
diligence. 

In  Smith  v.  Meegan,  22  Mo.  150,  defendant  took  plaintiff's  boat  to  make 
certain  repairs  upon  it.  Held,  that  he  was  bound  to  use  ordinary  diligence 
in  the  care  of  the  boat  and  was  liable  for  any  damages  to  it  occasioned  by 
launching  it  into  the  river  at  a  time  and  under  circumstances  of  great  danger 
which  ought  to  have  been  foreseen  and  which  resulted  in  the  destruction  of 
the  boat. 

Thus  it  is  apparent  that  the  skill  required  in  different  cases 
varies  greatly  according  to  the  nature  of  the  work  required,  but 
in  all  cases  honesty  and  good  faith  are  required  of  the  bailee. 


BAILMENT  FOR  MUTUAL  BENEFIT  193 

The  bailee,  for  hire,  has  the  right  to  the  undisturbed  posses- 
sion of  the  chattel  during  the  accomplishment  of  the  purposes 
of  the  bailment,  and  when  the  work  is  completed  he  has  the 
right  to  demand  suitable  compensation.  This  compensation 
may  be  fixed  in  advance  or  left  to  be  computed  later  on  a  basis 
of  what  is  just  and  reasonable. 

Redelivery.  —  When  the  service  required  by  the  bailment  has 
been  completed,  it  is  the  bailee's  duty  to  deliver  the  chattel  to  the 
bailor,  and  it  is  the  duty  oJ  the  bailor  to  pay  the  compensation. 
The  delivery  back  must  be  to  the  bailor,  his  agent,  or  to  his 
order.  It  is  customary  for  warehousemen  who  conduct  places 
of  storage,  also  wharfingers  who  keep  wharves  on  which  goods 
are  received  and  shipped  for  hire,  to  give  to  the  bailor,  or 
owner  of  the  goods,  at  the  time  the  goods  are  delivered,  a 
receipt  known  as  a  warehouse  or  wharfinger's  receipt.  These 
receipts  are  generally  considered  as  representing  the  property 
itself  and  are  assignable  from  one  person  to  another,  and  the 
warehouseman  is  held  to  be  the  bailee  of  the  person  to  whom 
the  receipt  is  transferred. 

Dodge  V.'  Meyer,  61  Cal.  405,  holds,  that  a  bill  of  lading  represents  the 
property  for  which  it  is  given,  and  by  its  indorsement,  or  delivery  without 
indorsement,  the  property  in  the  goods  may  be  transferred  where  such  is  the 
intent  in  making  the  indorsement  or  delivery. 

Lien.  —  Although,  as  we  have  said,  it  is  the  duty  of  the  bailee 
to  deliver  back  the  chattel,  still  he  may  keep  possession  until 
he  is  paid  for  his  services  on  the  chattel  or  payment  has  been 
tendered  to  him.  The  bailee  therefore  is  said  to  have  a  lien 
upon  the  chattels  for  his  services. 

Harris  v.  Woodruff,  124  Mass.  205,  held,  that  a  person  has  a  lien  for  the 
expenses  incurred  and  skill  bestowed  upon  a  horse  delivered  to  him  to  be 
trained  to  take  part  in  running  races. 

Low  V.  Martin,  18  111.  286,  held,  that  a  warehouseman  has  a  lien  for  proper 
charges  upon  grain  stored  in  his  warehouse,  and  he  may  retain  possession  of 
it  to  secure  the  payment  of  such  charges. 

This  lien  holds  only  for  the  service  bestowed  upon  the  par- 
ticular chattel,  and  lasts  only  while  the  bailee  retains  possession. 

COM.  LAW —  13 


194  BAILMENT 

In  Tucker  v.  Taylor,  53  Ind.  93,  defendant,  a  mechanic,  received  a  wagon 
to  repair.  In  payment  for  his  labor  he  was  to  have  the  use  of  the  wagon  and 
a  horse  to  take  a  journey.  After  the  work  was  done  the  defendant  permitted 
the  owner  to  take  the  wagon  with  the  understanding  that  it  was  to  be  returned 
at  a  later  day  and  the  horse  sent  with  it  so  that  he  could  make  the  journey.  The 
owner  having  failed  to  furnish  the  horse  and  wagon,  the  defendant  asserted 
his  lien  and  sold  the  wagon.  This  action  was  brought  by  the  original  owner 
to  recover  the  wagon.  Held,  that  defendant  lost  his  lien  when  he  relinquished 
the  possession  of  the  wagon  to  the  owner.  The  court  also  held  that  there 
was  no  lien  if  the  agreement  was  that  the  labor  should  be  paid  for  on  a  future 
day. 

Hired  Use  of  a  Chattel.  —  The  hiring  of  a  chattel  for  use  is 
frequently  illustrated  in  everyday  transactions.  The  hiring  of 
a  horse  at  a  Hvery  stable,  or  the  hiring  of  a  rowboat  on  the 
river,  are  each  included  in  this  class.  After  the  contract  is 
made  it  is  the  bailor's  duty  to  deliver  the  chattel  and  to  allow 
the  bailee  or  hirer  to  have  possession  for  the  agreed  purpose  or 
during  the  stipulated  time. 

In  Hickok  v.  Buck,  11  Vt.  149,  defendant  leased  plaintiff  a  farm  for  one 
year,  and  agreed  to  provide  a  horse  for  plaintiff  to  use  during  the  term.  He 
furnished  a  horse  at  first,  but  took  it  away  and  sold  it  before  the  expiration  of 
the  term.  Held,  that  plaintiff  had  an  interest  in  the  horse  for  the  period,  and 
could  recover  damages  from  defendant  for  taking  it  away. 

It  is  the  bailee  or  hirer's  duty  to  use  the  chattel  with  care, 
and  for  no  other  purpose  than  that  for  which  it  was  hired.  He 
also  has  a  further  duty  to  return  it  at  the  termination  of  the 
bailment  and  to  pay  the  consideration  for  its  use.  As  in  other 
instances  of  a  mutual  benefit  bailment,  the  bailee  must  use  ordi- 
nary care  and  diligence.  This  is  the  rule  only  when  the  chattel 
is  used  as  agreed.  And  if  the  bailee  uses  the  hired  property  in 
a  way  materially  different  from  that  mutually  agreed  upon,  he 
is  in  most  instances  liable  absolutely  for  any  resulting  loss  or 
injury.  This  is  illustrated  in  the  case  of  Fisher  v.  Kyle,  on 
page  183. 

Pledge  or  Pawn.  —  This  class  of  mutual  benefit  bailments  con- 
sists of  the  loan  or  deposit  of  a  chattel  as  security  for  some 
debt  or  agreement.  This  mode  of  securing  a  debt  differs 
from  a  chattel  mortgage  in  that  the  possession  is  transferred  in 


BAILMENT  FOR  MUTUAL  BENEFTT  1 95 

the  pledge,  while  in  the  case  of  a  chattel  mortgage  the  posses- 
sion is  generally  retained  by  the  owner.  In  the  mortgage  the 
title  passes  conditionally  to  the  mortgagee,  while  in  a  pledge  it 
remains  in  the  bailor. 

Collateral  security  is  another  term  applied  to  this  class  of 
bailments,  but  the  term  has  a  broader  meaning  and  includes 
chattel  mortgages  as  well.  The  name  "  pawn  "  is  the  old  expres- 
sion, and  is  still  in  use  as  applied  to  a  class  of  persons  called 
pawnbrokers,  who  make  a  business  of  loaning  money  on  articles 
of  personal  property  deposited  with  them.  But  the  same  object 
is  accomplished  by  the  banker  who  loans  money  and  accepts  as 
collateral  security,  stocks,  warehouse  receipts  of  grain,  bills  of 
lading,  etc.  From  this  we  can  see  that  the  subject  of  a  pledge 
may  be  any  kind  of  personal  property,  including  bills  and  notes, 
certificates  of  stock,  bonds,  and  bank  deposits.  But  the  thing 
pledged  must  be  in  existence,  for  if  it  has  ceased  to  exist,  the 
pledge  is  void ;  as,  in  a  case  where  the  chattel  has  been  burned 
or,  if  an  animal,  it  is  dead. 

Boynton  v.  Payrow,  67  Me.  587,  held,  that  the  giving  of  a  savings  bank 
book  to  a  third  person  for  delivery  to  a  creditor  as  security  for  a  debt  will 
create  a  valid  pledge  of  the  book  and  deposit. 

The  pledgee  must  exercise  ordinary  care  and  diligence  to- 
ward the  thing  pledged,  and  when  the  property  is  delivered  as 
security  for  a  particular  loan,  it  can  not  be  held  as  security  for 
any  other. 

In  the  case  of  Baldwin  v.  Bradley,  69  111.  32,  a  quantity  of  whisky  was 
pledged  for  money  borrowed,  and  a  few  weeks  later  another  lot  was  pledged 
for  another  loan.  Each  pledge  and  loan  was  separate  from  the  other.  Held, 
that  each  pledge  was  security  for  the  loan  made  at  the  time,  and  not  both  for 
the  first  loan. 

The  bailee  must  keep  the  chattel  in  his  possession,  and  if  he 
voluntarily  surrenders  possession  to  the  owner,  the  benefit  of  the 
bailment  or  pledge  as  security  is  lost.  An  exception  is  the  re- 
dehvery  of  the  thing  pledged  to  the  bailor  for  some  temporary 
purpose  and  with  the  understanding  that  the  pledgee  is  again  to 
have  possession,  in  which  case  the  security  is  not  lost. 

The  pledgee  has  the  right  to  use  the  chattel  pledged  if  it  is  of 


196  BAILMENT 

such  a  nature  that  it  requires  use  ;  for  instance,  a  horse  may  be 
driven  for  exercise.  But  if  the  article  pledged  would  be  the  worse 
for  usage,  then  the  pledgee  is  prohibited  from  using  it.  All 
profits  derived  from  the  article  pledged  belong  to  the  pledgor 
and  must  be  accounted  for  to  him,  but  all  necessary  expenses  for 
the  keeping  of  the  property  are  chargeable  to  the  owner. 

In  the  case  of  Androscoggin  Railroad  Co.  v.  Auburn  Bank,  48  Me.  335,  it 
was  held  that  when  a  pledgee  holds  as  collateral  securit}'  bonds  upon  which 
interest  accrues  at  certain  periods,  the  pledge  necessarily  implies  an  authority 
in  the  pledgee  to  collect  the  interest  and  hold  it  on  the  same  terms  as  the 
pledge  itself. 

The  pledgee  has  a  right  to  the  undisturbed  possession  of  the 
chattel  pledged.  After  the  pledgor  has  made  default  in  paying 
the  debt  secured,  the  pledgee  may  sell  the  chattel,  after  giving 
the  pledgor  a  reasonable  notice  of  the  time  and  place  of  sale, 
which  notice  must  be  preceded  by  demand  of  payment.  The  sale, 
unless  the  pledgee  is  a  pawnbroker,  must  be  by  public  auction, 
and  the  goods  must  be  struck  off  to  the  highest  bidder. 

In  Stearns  v.  Marsh.,  4  Denio  (N.Y.)  227,  defendant  sent  plaintiff  ten  cases 
of  boots  and  shoes  as  collateral  security  for  a  note  of  defendant's,  due  Novem- 
ber 5,  which  plaintiff  held.  From  November  2  to  15  plaintiff  advertised  an 
auction  sale  of  boots  and  shoes  and  sold  the  goods  so  pledged  on  the  latter 
date  without  any  notice  to  defendant.  They  sold  for  a  very  low  price,  and 
plaintiff  sued  for  the  balance  of  the  note.  The  shoes  were  worth  the  face  of 
the  note.  It  was  held  that  he  could  not  recover.  The  pledgee  can  not  sell  the 
pledged  property  until  he  has  called  upon  the  debtor  to  redeem  the  property, 
and  he  must  also  give  him  notice  of  the  time  and  place  of  sale. 

In  case  the  pledged  property  consists  of  notes,  bills,  or  bonds, 
which  will  soon  become  due,  the  proper  procedure  is  to  hold 
them  until  maturity  and  collect  them  if  possible,  applying  the 
proceeds  on  the  debt. 

Union  Trust  Co.  v.  Rigdon,  93  111.  458,  held,  that  a  pledge  of  commercial 
paper  as  collateral  security  for  a  debt  does  not,  in  the  absence  of  a  special 
power  to  that  effect,  authorize  the  pledgee  to  sell  the  security  so  pledged  either 
at  public  or  private  sale  upon  default  of  payment  of  the  original  debt  by  the 
pledgor.  The  pledgee  is  bound  to  hold  and  collect  the  same  as  it  becomes 
due,  and  apply  the  net  proceeds  to  the  payment  of  the  debt  so  secured.  The 
pledgee  has  no  right,  unless  in  extreme  cases,  to  compromise  with  the  patties 
to  the  security  for  a  less  sum  than  its  face  value. 


INNKEEPERS 


197 


The  pledgor  has  the  further  remedy  of  bringing  an  action  in 
the  equity  court  to  foreclose  his  claim  upon  the  article  pledged, 
and  when  large  amounts  are  involved,  this  is  a  frequent  proced- 
ure. When  the  original  debt  has  been  discharged  without 
recourse  to  the  property  pledged,  the  pledgor  is  entitled  to  the 
return  of  his  chattels,  the  object  of  the  bailment  having  been 
accomplished.  But  before  the  pledgor  is  entitled  to  the  return 
of  the  chattels  pledged,  the  principal  debt  and  also  the  interest 
and  all  necessary  expenses  incidental  to  the  pledge  must  be 
paid.  A  tender  made  by  the  pledgor  to  terminate  the  pledge 
must  include  both  the  interest,  if  any,  and  all  such  necessary 
expenses. 

5.     INNKEEPERS 

Definition.  —  Aside  from  the  classes  of  bailment  already  dis- 
cussed there  are  mutual  benefit  bailments  which,  because  of  the 
extraordinary  diligence  and  care  required  of  the  bailee,  are 
termed  exceptional  bailments.  Innkeepers  and  common  carriers 
are  the  principal  illustrations  of  this  class. 

An  innkeeper  is  one  who  keeps  a  house,  or  inn,  for  the  lodg- 
ing and  entertainment  of  travelers.  In  the  modern  sense  he  is 
a  hotel  keeper,  an  inn  being  the  same  as  our  hotel  or  tavern. 
The  innkeeper  or  hotel  keeper  differs  from  a  boarding-house 
keeper  in  that  his  is  a  public  calling  and  he  is  required  by  law  to 
receive  and  give  accommodations  to  all  persons  of  good  behavior 
who  apply  and  offer  to  pay  for  their  accommodation,  unless  his 
house  is  full.  Boarding-house  keepers,  or  restaurant  keepers, 
can  receive  or  refuse  such  persons  as  they  please. 

In  Pinkerton  v.  Woodward^  33  Cal.  557,  it  was  held  that  an  inn  is  a  public 
place  of  entertainment  for  all  travelers  who  choose  to.  visit  it.  It  is  distin- 
guished from  a  private  lodging  or  boarding  house  in  that  the  keeper  of  the 
latter  is  at  liberty  to  choose  his  guests,  while  the  innkeeper  is  obliged  to  enter- 
tain and  furnish  all  travelers  of  good  conduct  and  means  of  payment,  every- 
thing which  they  have  occasion  for  as  travelers  on  their  way,  A  traveler  who 
enters  an  inn  as  a  guest  does  not  cease  to  be  a  guest  by  proposing  to  remain 
a  given  number  of  days,  or  by  ascertaining  the  price  that  will  be  charged,  or 
by  paying  in  advance  for  his  entertainment.  This  question  arose  in  a  suit 
to  recover  gold  dust  brought  by  plaintiff  to  defendant's  hotel  and,  at  defend- 


198  BAILMEMT 

ant's  suggestion,  deposited  in  the  safe,  from  which  it  was  afterward  stolen. 
The  court  held  the  landlord  liable,  and  stated  the  rule  to  be  that  an  innkeeper 
is  liable  as  an  insurer  of  the  goods  of  the  guest  committed  to  his  care  unless 
the  loss  is  occasioned  by  the  act  of  God,  or  the  public  enemy,  or  by  the 
neglect  or  fraud  of  the  guest. 

Neither  a  company  owning  the  sleeping  cars  attached  to  a 
train  nor  a  steamship  company  can  be  held  to  be  an  innkeeper. 

In  Pullman  Palace  Car  Co.  v.  Smith,  73  111.  360,  Smith  purchased  a  ticket 
on  the  Palace  Car  Company's  car  and  while  asleep  on  the  trip  his  money  was 
taken  from  his  vest  pocket,  the  vest  being  under  his  pillow.  In  an  action  for 
the  money  it  was  held  that  Palace  Car  Companies  are  not  liable  as  innkeepers. 

Clark  V.  Burns,  118  Mass.  275,  held,  that  a  steamship  company  is  not 
liable  as  an  innkeeper  for  a  watch  worn  by  a  passenger  on  his  person  during 
the  day  or  kept  within  reach  at  night,  although  the  passenger  pays  a  round 
sum  for  transportation,  board,  and  lodging. 

Guests.  —  The  relation  of  innkeeper  arises  only  with  reference 
to  such  parties  as  are  his  guests,  a  guest  being  one  who  as  a 
transient  traveler  partakes  of  the  entertainment  of  the  inn  or 
hotel.    He  may  be  a  guest,  although  he  does  not  stay  over  night. 

In  Read  v.  Amidon,  41  Vt.  15,  plaintiff  and  his  fether  drove  to  defendant's 
hotel  with  their  horse  and  wagon.  They  had  the  horse  cared  for,  went  in  and 
laid  off  their  coats,  had  dinner  and  staid  until  evening,  when  they  left.  The 
court  held  that  this  created  the  relation  of  innkeeper  and  guest. 

In  Walling  v.  Potter,  35  Conn.  183,  plaintiff  resided  about  half  a  mile  from 
defendant's  hotel.  Plaintiff  went  to  the  hotel  one  evening,  staid  all  night  and 
had  his  breakfast,  for  which  he  paid.  Held,  that  the  relation  of  innkeeper  and 
guest  existed,  and  the  defendant  was  liable  as  such  for  money  lost  by  plaintiff 
at  the  hotel. 

A  person  receiving  a  gratuitous  accommodation  is  not  a 
guest.  To  create  the  relation  of  guest  the  innkeeper  must 
receive  pay  for  the  accommodation. 

Innkeeper's  Liability.  —  The  innkeeper  is  a  bailee  of  the  prop- 
erty and  baggage  of  the  guest,  and  this  includes  the  horse  that 
is  placed  in  the  innkeeper's  stable  as  well  as  the  wearing  apparel, 
jewelry,  and  money  of  the  guest.  By  the  common  law  the  re- 
sponsibility of  the  innkeeper  as  bailee  was  exceptionally  great. 
He  was  in  most  cases  held  to  be  an  insurer  of  the  goods  and 
liable  if  they  were  lost,  even  without  any  fault  on  his  part,  unless 


INNKEEPERS  1 99 

the  loss  was  occasioned  by  the  guest's  negligence  or  by  an  act 
of  God, —  flood,  lightning,  etc.,  —  as  illustrated  in  the  case  of 
Pinkerton  v.  Woodward,  which  we  explained  on  page  197. 

In  Hulett  V.  Swift,  33  N.Y.  571,  plaintiflPs  goods  were  destroyed  by  fire  while 
he  was  a  guest  at  defendant's  hotel.  The  cause  of  the  fire  was  unknown,  but 
plaintiff  was  free  from  negligence.  Held,  that  the  innkeeper  was  liable.  An 
innkeeper  is  an  insurer  of  property  committed  to  his  custody  by  a  guest  unless 
the  loss  be  due  to  the  negligence  or  fraud  of  the  guest,  or  to  the  act  of  God  or 
the  public  enemy. 

Other  cases  go  so  far  as  to  relieve  the  innkeeper  from  liability 
in  case  of  loss  if  he  can  show  positively  that  he  was  in  no  way 
negligent,  but  this  is  a  modification  of  the  common  law  rule. 

In  Howth  V.  Franklin,  20  Tex.  798,  it  was  held  that  when  property  com- 
mitted to  the  custody  of  an  innkeeper  by  his  guest  is  lost  the  presumption  is 
that  the  innkeeper  is  liable  for  it,  but  he  can  relieve  himself  from  that  liability 
by  showing  that  he  has  used  extreme  diligence. 

The  innkeeper  is  responsible  for  the  acts  of  his  servants  and 
employees  the  same  as  for  his  own  acts. 

Rockwell  V.  Proctor,  39  Ga.  105,  was  a  suit  against  defendant,  an  innkeeper, 
for  a  coat  which  had  been  left  by  plaintiff  who  was  a  guest  at  defendant's 
hotel.  The  coat  had  been  given  to  a  negro  in  charge.  Held,  that  the  defend- 
ant was  liable  as  innkeeper  for  the  acv  of  his  servant. 

Therefore  the  innkeeper  is  liable  for  any  theft  of  the  guest's 
property,  and  he  is  not  excused  on  the  plea  that  he  selected  his 
servants  carefully  and  performed  his  own  duty  well. 

Limitation  of  Liability. — The  statutes^  in  most  of  the  states 
now  allow  the  innkeeper  to  relieve  himself  from  the  extreme 
rigor  of  the  common  law,  permitting  him  to  limit  his  responsi- 
bility for  money  and  valuables  by  requiring  the  guest  to  deliver 
them  into  his  special  custody.  This  is  generally  done  by  requir- 
ing that  they  be  placed  in  the  innkeeper's  safe.  But  notice  of 
this  requirement  must  be  given  to  the  guest,  or  the  common  law 
liability  will  attach. 

Bodwell  V.  Bragg,  29  Iowa-232,  held,  that  the  mere  posting  of  notices  in  the 
room  of  a  guest,  limiting  the  liability  of  the  landlord  if  certain  directions  are 
not  observed,  does  not  operate  as  notice  to  the  g-.'-Cst  unless  he  reads  it  or  his 
attention  is  called  to  its  contents. 


200  BAILMENT 

Termination  of  Relation.  —  The  liability  of  the  innkeeper  for 
the  guest's  personal  property  exists  as  long  as  the  owner  of  the 
property  maintains  his  relation  as  guest  of  the  hotel  or  inn. 

MacDonald  v.  Edgerton,  5  Barb.  (N.Y.)  560,  held,  that  if  a  person  after 
becoming  a  guest  at  an  inn  goes  away  for  a  brief  period,  leaving  his  property 
with  the  intention  of  returning,  he  is  to  be  considered  as  still  continuing  a 
guest,  and  if  his  property  is  lost  during  his  absence,  the  innkeeper  is  liable. 

Sasseen  v.  Clark,  37  Ga.  242,  held,  that  when  a  hotel  keeper  sonds  his  por- 
ter to  the  cars  to  receive  the  baggage  of  persons  traveling,  and  there  is  deliv- 
ered to  the  porter  the  baggage  of  a  traveler  who  becomes  the  guest  of  the 
hotel,  the  liability  of  the  innkeeper  begins  at  the  delivery  to  the  porter  and  con- 
tinues until  redelivery  to  the  actual  custody  of  the  guest.  If  the  porter  takes 
charge  of  the  baggage  to  deliver  to  the  car,  the  liability  of  the  innkeeper  con- 
tinues until  the  baggage  is  so  delivered. 

But  after  the  relation  of  guest  has  ceased,  the  innkeeper  is 
liable  for  property  left  with  him  only  as  an  ordinary  bailee. 

Innkeeper's  Lien.  —  As  we  have  seen,  the  innkeeper  is  com- 
pelled to  receive  any  proper  person  who  may  apply  for  accom- 
modations, but  he  need  not  receive  those  who  can  not  pay,  and 
he  may  require  payment  to  be  made  in  advance. 

When  he  is  not  paid  in  advance,  the  law  gives  him  a  lien  for 
all  unpaid  charges  upon  the  property  which  the  guest  has 
brought  into  the  house  and  placed  in  the  custody  of  the  inn- 
keeper as  bailee. 

In  Threfall  v.  Borwick,  L.R.  10  Q.B.  (Eng.)  210,  A  went  to  the  defendant's 
inn  and  staid  there  with  his  family,  taking  with  him  to  the  inn  as  his  own  a 
piano  which  he  had  hired  of  the  plaintiff.  When  A  left  the  inn  he  was  in  debt 
to  defendant  and  defendant  detained  the  piano  by  virtue  of  his  lien  as  inn- 
keeper.    Held,  that  defendant  could  hold  the  piano  under  such  lien. 

The  innkeeper  can  detain  the  property  until  he  is  paid,  but  if 
he  voluntarily  surrenders  it,  the  lien  is  lost.  Statutes  in  most  of 
the  states  now  give  boarding-house  keepers  a  like  lien,  but  by 
common  law  it  extended  only  to  innkeepers. 

6.     COMMON   CARRIERS 

Definition. — Common   carriers   also   belong   to   the  class  of 

exceptional  bailments.     Like  innkeepers  they  are  as  a  general 

•  rule  required  to  serve  all  alike  and  can  not  choose  their  custom- 


COMMON  CARRIERS  20I 

ers.  They  are  also  bound  to  exercise  a  greater  degree  of  care 
and  diligence  toward  property  placed  in  their  possession  than 
any  of  the  ordinary  bailees. 

A  carrier  is  defined  to  be  one  who  undertakes  to  transport 
personal  property  from  one  place  to  another.  He  may  be  either 
a  private  carrier  who  comes  under  the  class  of  ordinary  bailees 
or  a  common  carrier  who  is  subject  to  special  rules.  A  common 
carrier  is  one  whose  regular  calling  is  to  transport  chattels  for 
all  who  may  choose  to  employ  and  remunerate  him,  while  a 
private  carrier  is  one  who  transports  goods  gratuitously  or  only 
in  special  cases. 

Pierce  v.  Milwaickee  Railway  Co.,  23  Wis.  387,  was  an  action  to  recover  the 
value  of  eight  bundles  of  bags  which  had  been  used  in  transporting  grain  and 
were  then  on  their  return  empty.  Defendants  sought  to  avoid  liability  as  com- 
mon carriers  by  showing  that  it  was  the  usage  of  the  raUroads  to  carry  empty 
bags  free  of  charge,  and  that  they  were  responsible  only  for  gross  negligence. 
Held,  that  the  consideration  for  such  carriage  was  the  patronage  given  the 
company  in  carrying  the  grain ;  that  the  carriage  was  therefore  not  gratuitous, 
and  the  defendant  was  liable  as  a  common  carrier. 

Steele  v.  McTyer,'^i  Ala.  667,  was  an  action  against  defendant  as  a  common 
carrier  for  loss  of  fifteen  bales  of  cotton  shipped  by  plaintiff  on  defendant's  flat- 
boat  to  Mobile.  The  boat  was  wrecked  by  running  into  a  log.  Held,  that 
defendant  was  liable,  as  the  damage  was  not  due  to  an  act  of  God  or  inevitable 
accident.  The  court  also  said  that  if  the  defendant  held  himself  out  to  the 
general  public,  though  but  for  a  single  trip,  as  ready  and  willing  to  carry  any 
cotton  that  might  be  shipped  on  the  boat,  he  was  liable  as  a  common  carrier 
to  persons  availing  themselves  of  his  services;  but  if  he  did  not  constitute 
himself  the  servant  of  the  public,  proposing  only  to  carry  cotton  belonging  to 
particular  persons  with  whom  he  had  contracted  for  a  full  cargo,  he  could  not 
be  held  liable  as  a  common  carrier  to  a  third  person  with  whom  the  master  of 
a  boat,  in  violation  of  his  instructions,  made  a  contract  to  carry  freight. 

A  carrier  may  be  one  who  operates  by  land  or  by  water,  the 
laws  regulating  their  liability  being  much  the  same.  Express, 
railroad,  and  steamboat  companies  are  everyday  examples  of 
common  carriers.  In  order  to  constitute  one  a  common  carrier 
two  things  are  necessary  ;  iirst,  a  continuous  offer  to  the  public  to 
carry,  and  second,  the  charge  of  a  compensation  for  the  service. 

Haynie  v.  Waring,  29  Ala.  263,  held,  that  one  who  undertakes  to  carry 
goods  for  another  gratuitously  is  liable  only  for  gross  negligence  and  not  as  a 
common  carrier. 


202  BAILMENT 

Goods  and  Payment  for  Carriage.  —  Common  carriers  are  said 
to  be  carriers  of  "  goods,"  and  this  term  includes  animals,  money, 
and  in  fact  any  article  of  personal  property  that  is  subject  to 
transportation.  By  the  common  law  a  common  carrier  is  bound 
to  receive  without  respect  of  persons  whatever  may  be  offered 
him  for  transportation,  when  the  charges  are  paid  or  offered  to 
be  paid.  Payment  must  be  offered,  as  the  carrier  is  under  no 
obligation  to  carry  free  or  upon  credit.  If  he  does  not  obtain 
his  pay  upon  receipt  of  the  goods,  he  may  hold  them  until  his 
charges  are  paid,  the  law  creating  a  Hen  upon  the  goods  for  the 
charges  and  expenses  in  favor  of  the  common  carrier.  This 
compensation  is  sometimes  termed  "freight"  when  applied  to 
the  charge  for  carrying  goods.  After  the  goods  have  been  de- 
livered to  the  carrier  the  shipper  can  not  retake  them  without 
paying  the  freight,  and  if  they  are  intercepted  before  reaching 
their  destination,  the  full  freight  can  be  recovered  by  the  carrier. 
The  consignor  or  shipper  is  the  party  primarily  liable  for  the 
freight  and  not  the  consignee  or  the  person  to  whom  the 
goods  are  shipped,  unless  the  consignee  expressly  agrees  to 
pay  it. 

In  Wooster  v.  Tarr,  8  Allen  (Mass.)  270,  defendant  shipped  mackerel  at 
Halifax  upon  plaintiffs  vessel.  In  the  bill  of  lading  it  was  specified  that 
they  be  delivered  in  Boston  "unto  Howe  &  Co.  or  to  their  assigns,  he  or  they 
paying  freight  for  said  goods."  They  were  delivered  to  parties  to  whom 
Howe  &  Co.  had  sold,  and  as  plaintiff  could  not  collect  the  freight  from 
Howe  &  Co.  who  were  insolvent,  it  was  held  that  he  could  recover  of  de- 
fendant, even  though  the  goods  were  purchased  for  and  on  account  of  Howe 
&  Co.  and  shipped  at  their  risk.  The  shipper  is  liable  to  the  carrier  for  the 
freight,  even  though  he  does  not  own  the  goods  and  the  carrier  has  waived 
his  lien  thereon. 

Regulation  of  Charges.  — The  charges  that  may  be  made  are 
in  some  instances  regulated  by  statute.  In  the  absence  of  any 
statute  regulating  the  subject,  the  carrier  may  agree  to  give  one 
party  a  lower  rate  than  others,  but  he  can  not  impose  exorbitant 
or  unreasonable  rates  or  conditions  upon  any  one. 

In  the  case  o^  Johnson  v.  Pensacola  Railroad  Co.,  16  Fla.  623,  plaintiff  sued 
defendant  railroad  company  for  excessive  freight  money  claimed  to  have  been 


COMMOJV  CARRIERS 


203 


paid.  He  proved  that  he  was  charged  more  than  another  shipper  of  lumber. 
Held,  that  as  a  common  carrier  defendant  can  not  charge  excessive  or  unreason- 
able rates  of  freight.  The  common  law  protects  the  individual  from  extortion 
and  limits  the  carrier  to  a  reasonable  rate,  but  it  does  not  require  equal  rates 
to  all. 

318J  tons  of  Coal,  14  Blatchf.  (U.S.)  453.  In  this  case  the  New  Haven  Rail- 
way Co.,  owning  a  dock  at  New  Haven,  refused  to  receive  coal  on  its  cars  on 
said  dock  from  a  canal  boat  thereat,  unless  the  master  of  the  boat  employed 
shovelers  designated  by  the  company,  at  a  price  fixed  by  the  company,  which 
was  ordinarily  the  usual  market  price,  to  shovel  the  coal  into  tubs  which  were 
hoisted  by  derricks  into  the  cars.  The  canal  boat  owners  paid  the  company 
ten  cents  per  ton  for  the  use  of  the  tubs  and  machinery.  Held,  that  the 
requirements  of  the  company  were  unreasonable  and  could  not  be  enforced. 

The  carrier  can  retain  the  goods  under  his  lien  until  all  the 
freight  and  charges  are  paid. 

Not  only  must  he  be  a  carrier  for  hire,  but  he  must  carry  in 
the  regular  course  of  his  business  in  order  to  be  classed  as  a 
common  carrier.  That  is,  it  is  not  sufficient  that  he  carry  goods 
in  some  particular  business;  he  must  undertake  to  carry  for 
any  one  who  asks  him.  The  test  is  whether  he  carries  for  par- 
ticular persons  only  or  for  every  one  who  applies.  If  he  holds 
himself  out  to  carry  for  every  one  who  asks  him,  he  is  a  common 
carrier;  but  if  he  does  not  do  it  for  every  one,  but  carries  for 
certain  persons  only,  it  is  a  matter  of  special  contract.  Or,  as 
it  is  said  in  other  words,  a  common  carrier  is  one  who  follows 
the  business  as  a  public  employment. 

In  Satterlee  v.  Groat,,  i  Wend.  (N.Y.)  272,  defendant,  who  had  been  a 
common  carrier  between  Schenectady  and  Albany,  sold  out  all  of  his  teams 
but  one  which  he  used  on  his  farm  and  for  a  year  or  more  entirely  gave  up 
the  business.  One  Dows  then  engaged  him  to  bring  some  loads  for  him  from 
Albany  to  Schenectady.  He  sent  his  servant  to  bring  these  loads,  but  ex- 
pressly instructed  him  to  carry  for  no  one  else.  The  man  brought  two  loads, 
and  when  he  went  for  the  third,  as  it  was  "not  ready,  he,  contrary  to  his 
instructions  from  defendant,  took  a  load  from  plaintiff'  to  be  delivered  to  Frank- 
fort. On  the  way  one  box  was  broken  into  and  stolen.  The  servant  was 
afterwards  convicted  of  the  theft.  Held,  that  the  defendant  could  not  be  held 
unless  he  was  at  the  time  a  common  carrier,  and  if  the  defendant  was  em- 
ployed under  a  special  contract  for  carrying  the  goods,  he  was  not  liable.  The 
defendant  having  abandoned  his  business  as  a  common  carrier  stood  upon 
the  same  footing  as  he  would  if  he  had  never  been  engaged  in  such  business. 


204  BAILMENT 

Right  to  refuse  Goods.  —  As  we  have  said,  a  common  carrier 
is  bound  by  the  common  law  to  receive  whatever  is  offered  to 
him  to  carry  without  respect  to  the  persons  offering.  This  rule 
is  subject  to  three  qualifications,  viz. :  First,  the  offer  of  the 
chattel  must  be  for  hire ;  Second,  the  bailment  must  be  within 
the  carrier's  means  of  safe  conveyance ;  Third,  such  carriage 
should  be  in  the  line  of  his  vocation. 

We  have  already  discussed  the  first  qualification.  As  to  the 
second,  it  is  but  reasonable  that  the  carrier  may  refuse  to  receive 
goods  when  he  has  not  sufficient  room  or  adequate  facilities  for 
carrying  them  safely.  He  is  under  no  obligation  to  furnish 
extra  equipment  to  satisfy  an  unusual  demand.  So,  if  the 
article  carried  be  larger  or  heavier  than  the  carrier  can  handle, 
he  may  refuse  it  on  that  ground.  Furthermore,  he  may  decline 
to  receive  particular  property  which  may  at  the  time  V"^  ex- 
posed to  extraordinary  danger  or  hazard  on  his  route. 

Phelps  V.  Illinois  Central  Railway  Co.,  94  111.  548,  held,  that  the  fact  that 
the  road  was  under  the  military  control  of  the  officers  of  the  United  States 
Army  was  a  sufficient  excuse  for  defendant  to  refuse  to  receive  freight  while 
the  road  was  in  such  control  during  the  Civil  War,  it  not  being  safe  for  the 
defendant  to  undertake  the  carriage  of  freight. 

The  article  offered  for  transportation  may  not  be  in  the  line 
of  the  carrier's  vocation.  A  freight  carrier  may  not  necessarily 
hold  himself  out  to  carry  passengers.  He  need  carry  only  the 
class  of  goods  included  in  his  public  profession. 

Johnson  v.  The  Midland  Railway  Co.,  4  Exch.  (Eng.)  367,  was  an  action 
for  damages  against  the  Railway  Co.  for  refusing  to  transport  five  tons  of 
coal  offered  by  plaintiff.  The  defendant  never  carried  coal  and  did  not  hold 
itself  out  for  any  such  business,  and  could  not,  unless  it  gave  up  its  passenger 
traffic.  Held,  that  a  common  carrier  is  not  bound  to  carry  every  description 
of  goods  but  only  such  goods,  and  to  and  from  such  places,  as  he  has  publicly 
professed  to  carry,  and  for  which  purposes  he  has  conveyances. 

Interstate  Commerce  Law.  —  The  carrier  may  prescribe  reason- 
able rules  as  to  the  time  and  manner  of  receiving  goods.  He 
can  not  be  required  to  receive  them  at  an  unreasonable  hour  or 
place,  and  he  may  insist  that  the  goods  be  packed  in  a  reasonable 
way.     But  by  statutes  passed  in  most  of  the  states  the  carrier  is 


COMMON  CARRIERS  205 

prohibited  from  discriminating  in  favor  of  one  customer  over 
another  either  in  rates  or  privileges  of  any  kind.  The  common 
carrier  must  not  select  his  patrons  arbitrarily,  but  must  furnish 
equal  facilities  to  all. 

To  further  this  object  a  statute  was  passed  by  the  Congress 
of  the  United  States  in  1887  which  is  known  as  the  Interstate 
Commerce  Law.  This  law  was  designed  to  regulate  the  com- 
merce between  the  states  and  applies  to  all  common  carriers, 
either  by  land  or  water,  who  do  business  in  two  or  more  states 
or  territories.  It  provides  that  no  discrimination  shall  be  made 
between  large  or  small,  constant  or  occasional,  shippers,  and  that 
no  charges  shall  be  unjust  or  unreasonable.  It  also  provides 
that  proportionate  charges  shall  be  made  for  long  and  short 
distances.  The  law  further  requires  that  the  schedule  of  rates 
shall  be  published  and  filed  with  commissioners  who  are  appointed 
to  oversee  the  enforcement  of  the  law  and  are  known  as  the 
Interstate  Commerce  Commissioners.  The  act  also  makes  it  un- 
lawful for  any  common  carrier  who  comes  under  its  provisions  to 
enter  into  any  combination  or  agreement  by  which  the  continuous 
carriage  of  freight  from  one  point  to  another  shall  be  delayed  or 
interrupted. 

All  of  the  large  railroad  and  express  companies  do  business 
in  more  than  one  state,  and  therefore  come  within  the  provisions 
of  this  act. 

When  Liability  Begins.  —  The  common  carrier  becomes  re- 
sponsible for  the  goods  when  they  are  delivered  to  him  for 
carriage  and  accepted  by  him  in  the  capacity  of  a  carrier.  The 
delivery  should  be  made  to  the  agent  or  person  whose  business 
it  is  to  receive  freight,  not  to  any  one  who  may  be  about  the 
place  of  delivery, 

Trowbridge  v.  Chapin,  23  Conn.  595,  was  an  action  against  the  owner  of 
a  steamboat  as  a  common  carrier.  It  was  the  duty  of  the  clerk  of  the  boat 
to  receive  freight  for  transportation.  Plaintiff's  property  was  taken  on  board 
by  a  porter  and  left  in  a  place  pointed  out  by  a  person  whose  appearance  and 
employment  indicated  that  he  was  a  common  laborer.  No  inquiry  was  made 
by  the  porter  as  to  whether  the  person  had  authority  to  receive  the  freight. 
Held,  that  it  was  not  sufficient  evidence  of  delivery  to  make  defendant  liable 
lor  the  loss  of  the  property. 


206  BAILMENT 

It  is  not  necessary,  as  we  have  seen,  that  the  transportation 
shall  actually  begin  before  the  common  carrier's  liability  at- 
taches, but  rather  the  carrier  is  liable  as  soon  as  he  accepts 
the  goods.  So  in  the  case  of  expressmen  and  other  carriers 
who  go  after  the  goods  and  receive  them  at  the  shipper's  resi- 
dence or  place  of  business,  their  liability  begins  when  they 
receive  the  goods. 

Receipts. — It  is  always  prudent  for  the  shipper  or  sender  of  the 
goods  to  demand  of  the  carrier  a  receipt  for  the  articles  delivered. 
This  is  termed  a  freight  receipt,  way  bill,  or  bill  of  lading.  Origi- 
nally a  bill  of  lading  was  given  only  by  a  carrier  by  water,  but 
it  is  now  given  by  all  carriers.  It  consists  of  a  writing  showing 
the  receipt  of  the  goods  and  the  terms  of  the  contract  of  carriage 
in  brief  form. 

7.     LIABILITY  OF  COMMON   CARRIERS 

Limits  of  Liability.  —  As  in  the  case  of  the  innkeeper,  the 
liability  of  the  common  carrier  is  exceptionally  great.  He  is 
held  liable  as  an  insurer  of  the  goods  against  all  risks  of  loss  or 
injury,  except  when  the  loss  arises  from  the  following  causes : 
(i)  by  an  act  of  God,  or  by  a  public  enemy,  (2)  by  the  act  of  the 
shipper,  (3)  by  the  act  of  the  public  authority,  (4)  from  the 
nature  of  the  goods.  In  the  early  times  this  strict  measure  of 
responsibility  was  placed  upon  the  carrier  for  reasons  of  public 
policy.  In  an  age  of  thieving  and  lawlessness  the  carrier  had 
many  opportunities  to  defraud  his  customers,  and,  by  collusion 
with  thieves  and  robbers,  to  cause  the  shipper  to  be  defrauded. 
To  this  absolute  liability  as  an  insurer  there  were  only  two 
exceptions  under  the  common  law,  and  these  were  losses  occa- 
sioned either  by  act  of  God  or  the  king's  enemies.  But  modern 
methods  make  the  reason  for  the  rule  less  urgent,  and  modern 
legislation  has  relieved  the  carrier's  liability  in  the  other  cases 
just  specified. 

Loss  or  Injury  by  Act  of  God.  —  This  includes  those  causes 
which  man  neither  produced  nor  can  contend  against ;  as,  acci- 
dents caused  to  the  goods  while  the  carrier  is  within  the  line  of 


LIABILITY  OF  COMMON  CARRIERS 


207 


duty,  by  lightning,   tempest,  earthquake,  flood,  sudden  death, 
snow,  rough  winds,  freezing,  and  thawing. 

Denny  v.  New  York  Central  Railroad  Co.,  79  Mass.  481,  held,  that  the 
rising  of  the  Hudson  River,  caused  by  a  flood,  which  ruined  goods  in  defend- 
ant's warehouse,  was  an  act  of  God  for  which  defendant  would  not  be  liable. 

Ballentine  v.  North  Missouri  Railroad  Co.,  40  Mo.  491,  held,  that  a  snow- 
storm which  blocks  up  a  railroad  to  the  extent  that  it  delays  and  hinders 
the  running  of  the  cars  is  an  act  of  God  for  which  a  carrier  can  not  be  held 
liable. 

But  a  prudent  man  will  foresee  the  less  violent  of  these 
causes,  such  as  snow  and  freezing,  and  a  carrier  will  not  be 
excused  for  loss  in  such  cases,  unless  he  has  exercised  prudence 
and  foresight  in  regard  to  them. 

In  the  case  of  Vail  v.  Pacific  Railroad,  63  Mo.  230,  fruit  trees  shipped  on 
defendant's  road  were  frozen  while  en  route,  and  the  freezing  was  held  to  be 
an  act  of  God  for  which  the  company  was  not  liable,  unless  caused  by  un- 
necessary delay  in  transporting  the  trees  or  by  their  careless  exposure  to  the 
cold. 

In  Parsons  v.  Hardy,  14  Wend.  (N.Y.)  215,  plaintiff  received  on  Novem- 
ber 19,  at  Albany,  a  quantity  of  merchandise  to  transport  by  canal  to  Ithaca. 
When  he  arrived  at  Montezuma  locks  the  winter  set  in,  and  he  was  prevented 
by  ice  from  going  farther,  having  had  to  stop  on  the  way  to  repair  an  accident 
caused  by  being  run  into  by  a  scow.  Plaintiff  took  care  of  the  goods  at 
Montezuma,  but  the  defendant  took  them  from  there.  Held,  that  the  plaintiff 
should  have  delivered  them  in  the  spring,  but  if  the  owner  took  them,  it 
relieved  the  plaintiff  and  he  could  x&covtx  pro  rata  for  the  part  performed.  As 
to  the  time  of  delivery,  the  carrier  must  exercise  due  diligence,  and  is  excused 
by  accident  or  misfortune.  It  is  enough  if  he  exercises  due  care  and  diligence 
to  guard  against  delay. 

Loss  by  Fire.  —  Loss  by  fire,  unless  caused  by  lightning,  is  not 
an  act  of  God  and  a  common  carrier  is  not  excused  from  loss 
by  this  cause  unless  it  is  expressly  contracted  for. 

Parker  v.  Flagg,  26  Me.  181,  held,  that  unless  a  carrier  limits  his  responsi- 
bility by  the  terms  of  a  bill  of  lading  or  otherwise,  he  can  not  escape  the 
obligation  to  deliver  the  goods  at  their  destination  unless  prevented  by  the 
public  enemy  or  by  an  act  of  God.  A  loss  by  accidental  fire  is  not  a  sufficient 
excuse  unless  the  fire  be  caused  by  lightning. 

Loss  or  Injury  by  Public  Enemies.  —  This  is  a  loss  caused  by 
those  at  war  with  one's  country. 


208  BAILMENT 

In  McCranie  v.  Wood,  24  La.  An.  406,  defendant  contracted  with  plaintif!, 
a  carrier  by  boat,  to  remove  certain  cotton  belonging  to  plaintiff  to  places 
deemed  safe  from  hostilities  during  the  Civil  War.  It  was  stored  where  it 
was  deemed  safe,  but  hostilities  arose  in  that  direction  and  the  cotton  was 
destroyed.  Held,  that  defendant  had  performed,  as  far  as  was  in  his  power, 
and  the  goods  having  been  destroyed  by  the  public  enemy,  he  was  not  liable. 

But  the  violence  of  mobs  or  rioters  does  not  bring  the  par- 
ticipants within  the  term  "public  enemies." 

Loss  or  Injury  by  Act  or  Fault  of  the  Consignor.  —  This 
arises  when  the  shipper  carelessly  packs  the  goods  and  they  are 
injured,  or  when  he  incorrectly  addresses  them  so  that  they  are 
delayed  or  lost,  in  which  cases  the  carrier  is  not  Hable. 

In  Klmiber  v.  American  Express  Co.,  21  Wis.  21,  plaintiff  shipped  some 
clothing  which  was  not  entirely  covered  and  while  being  transported  by  de- 
fendant was  damaged  by  rain.  Held,  that  the  owner  is  not  required  to 
cover  goods  shipped  so  that  they  shall  be  safe  from  rain,  mud,  and  fire,  and  the 
defendant  here  is  liable.  If  there  had  been  a  hidden  defect  in  the  packing 
from  which  damage  resulted  in  the  ordinary  course  of  handling,  it  would  have 
been  the  act  of  the  owner  and  the  carrier  would  have  been  relieved. 

In  Congar  v.  Chicago  Railway  Co.,  24  Wis.  157,  plaintiff  shipped  by  de- 
fendant's road,  trees  and  other  nursery  stock  from  Whitewater,  Wis.,  directed 
to  "  luka,  la."  The  consignee  was  a  resident  of  luka,  Tama  Co.,  la.  The  de- 
fendant took  them  to  luka,  Keokuk  Co.,  la.,  in  consequence  of  which  delay  the 
stock  became  worthless.  Defendants  proved  that  they  examined  the  maps 
and  fotind  the  place  in  Keokuk  Co.  Held,  that  the  company  was  not  respon- 
sible. The  negligence,  if  any,  was  upon  the  part  of  plaintiff  in  not  marking 
the  goods  with  the  name  of  the  county  or  the  road  by  which  they  were  to  go. 

Any  deception  or  bad  faith  on  the  part  of  the  shipper  as  to 
the  article  shipped,  whereby  it  is  made  to  appear  less  valuable 
or  less  liable  to  be  injured,  will  relieve  the  carrier  from  responsi- 
bility for  any  injury. 

American  Express  Co.  v.  Perkins,  42  111.  458,  was  an  action  brought 
against  the  express  company  to  recover  for  the  value  of  a  package  containing 
a  wreath,  made  partially  of  glass,  which  was  broken.  The  company  was  not 
informed  of  the  fragile  nature  of  the  goods  shipped.  Held,  that  in  order  to 
charge  a  common  carrier  as  insurer  he  must  be  treated  in  good  faith,  and  con- 
cealment or  suppression  of  the  truth  will  relieve  him  from  liability.  When  a 
package  containing  articles  of  a  brittle  nature  is  delivered  to  a  carrier,  he  must 
be  informed  of  the  nature  of  its  contents  in  order  that  he  may  use  care  pro- 
portionate to  its  fragile  character,  if  be  is  to  be  held  liable  as  a  common 
carrier. 


UABILITY  OF  COMMON  CARRIERS  209 

Loss  or  Injury  arising  from  the  Nature  of  the  Goods.  —  When 
the  loss  arises,  not  from  any  act  of  the  carrier,  but  because  of 
the  inherent  nature  of  the  goods,  the  carrier  is  reheved.  This 
applies  to  the  natural  decay  of  vegetables  and  fruit  and  other 
perishable  commodities,  also  to  the  loss  of  live  stock  arising 
from  their  own  viciousness  and  habits,  as  when  cattle  gore 
or  trample  upon  each  other.  But  the  carrier  must  take  such 
care  of  live  stock  as  prudence  and  foresight  demand,  and  must 
feed  and  water  them,  unless  the  shipper  undertakes  this  duty. 

Clarke  v.  Rochester  and  Syracuse  Railroad  Co.,  14  N.Y.  570,  was  an  action 
for  damages  for  the  loss  of  a  horse  shipped  on  defendant  railway  from  Roches- 
tei  to  Auburn,  which,  upon  arrival,  was  found  dead.  Held,  that  the  carrier  was 
liable,  unless  the  damage  was  caused  by  an  occurrence  incident  to  the  carriage 
of  animals  in  a  railroad  car,  and  which  the  defendant  could  not  by  the  exer- 
cise of  diligence  and  care  have  prevented. 

Evans  v.  Fitchburg  Railroad  Co.,  in  Mass.  142,  was  also  an  action  for 
injury  to  a  horse,  and  the  court  held  that  a  common  carrier  is  liable  for  all 
accidents  and  mismanagements  incident  to  the  transportation,  but  not  for 
injuries  produced  by  or  resulting  from  the  inherent  defects  or  essential  quali- 
ties of  the  article  which  he  undertakes  to  transport.  If  the  injury  is  produced 
by  fright,  restiveness,  or  viciousness  of  the  animal,  which  the  defendant  exer- 
cised all  proper  care  and  foresight  to  prevent,  it  would  be  unreasonable  to 
hold  him  responsible  for  the  loss. 

Loss  or  Injury  caused  by  Public  Authority.  —  An  example  of 
such  a  loss  is  a  seizure  of  the  goods  by  process  of  law,  or  by  the 
direct  act  of  one's  own  government. 

Ohio  Railway  Co.  v.  Yohe,  51  Ind.  181,  was  an  action  against  the  railroad 
comf>any  for  failure  to  deliver  goods  shipped  by  them.  Their  answer  was 
that  while  the  wheat  was  being  shipped,  one  Johnson  took  out  a  writ  of 
replevin,  and  by  virtue  of  this  writ  the  sheriff  of  the  county  seized  the  grain 
and  took  it  out  of  the  possession  of  the  company.  Held,  that  the  common 
carrier  is  excused  from  liability  when  the  goods  are  seized  by  virtue  of  a  legal 
process  and  taken  out  of  his  hands. 

Limitation  of  Liability  by  Contract.  —  The  carrier  in  most  of 
the  states  may  limit  his  Uability  to  a  certain  extent  by  contract 
with  the  shipper.  That  is,  by  special  agreement  a  lighter 
degree  of  responsibility  may  be  stipulated  for.  He  may  stipu- 
late not  to  be  liable  for  loss  by  fire,  robbery,  accidental  delay,  or 
dangers  from  navigation,  provided  he  is  not  himself  in  fault; 

COM.  LAW  — 14 


210  BAILMENT 

but  he  can  not  contract  away  his  Hability  for  the  fraud,  mis- 
conduct, or  negligence  of  himself,  his  agents,  or  servants.  Not- 
withstanding his  attempt  by  contract  to  limit  his  liability,  he  will 
still  be  held  to  the  responsibility  of  a  mutual  benefit  bailee,  and 
he  is  required  to  exercise  ordinary  care  and  diligence,  as  well  as 
honesty  and  good  faith. 

Camp  V.  Hartford  Steamboat  Co,,  43  Conn.  333,  was  an  action  against  tiie 
defendant  steamboat  company  as  a  common  carrier  for  the  value  of  goods 
shipped  by  them  and  lost  through  the  boat  running  upon  a  rock  and  thereby 
springing  a  leak.  The  bill  of  lading  given  by  the  company  when  the  goods 
were  shipped  provided  that  the  company  should  not  be  responsible  for  damage 
to  the  goods  from  any  perils  or  accidents  not  resulting,  from  their  own  negli- 
gence or  that  of  their  servants.  Held,  that  the  exemption  stipulated  for  was 
valid  and  lawful  and  the  defendants  were  not  liable. 

Boorman  v.  American  Express  Co.,  2i  Wis.  152,  held,  that  an  express  com- 
pany may  exempt  itself  by  special  contract  from  its  liability  as  an  insurer ;  or 
for  loss  or  damage  of  any  package  for  over  $50,  unless  the  just  and  true  value 
thereof  is  stated  in  the  receipt ;  or  upon  any  property  not  properly  packed  and 
secured  for  transportation ;  or  upon  any  fragile  fabric  unless  marked  as  such 
upon  the  package  containing  it,  and  when  a  receipt  embodying  such  conditions 
is  given  to  the  shipper,  his  assent  is  presumed. 

The  carrier  is  also  allowed  to  state  a  reasonable  limit  to  the 
amount  for  which  he  shall  be  held  liable  in  case  of  loss,  unless 
the  shipper  shall  state  the  valuation  at  the  time  of  the  delivery 
of  the  goods  to  the  carrier.  Express  companies  generally  con- 
tract that  in  case  no  valuation  is  given,  they  will  not  be  liable 
for  a  sum  to  exceed  $50,  and  such  a  provision  is  generally 
upheld. 

In  Belger  v.  Dinsmore,  51  N.Y.  166,  plaintiff  expressed  a  trunk  by  defend- 
ant company  and  received  a  receipt  which  contained  a  statement  that  as  a  part 
of  the  consideration  of  the  contract  it  was  agreed  that  in  case  of  loss  the 
owner  should  not  demand  over  $50,  at  which  price  the  article  was  valued, 
unless  otherwise  expressed.  Held,  that  by  accepting  the  receipt  and  failing 
to  give  another  valuation,  the  plaintiff  assented  to  the  limitation,  and  in  case 
of  loss  could  claim  no  more. 

In  Hart  v.  Penn.  Railroad  Co.,  112  U.S.  331,  plaintiff  shipped  five  horses 
and  other  property  in  one  car,  under  a  bill  of  lading  signed  bv  him,  which 
stated  that  the  horses  were  to  be  transported  "  upon  the  following  terms  and 
conditions  which  are  admitted  and  accepted  by  me  to  be  just  and  reasonable. 
First,  to  pay  freight  thereon  *  at  a  specified  rate '  on  the  condition  that  the 


LIABILITY  OF  COMMON  CARRIERS  211 

carrier  is  liable  on  the  stock  to  the  extent  of  the  following  agreed  valuation: 
if  horses  or  mules,  not  to  exceed  $200,  etc."  By  the  negligence  of  the  railroad 
company  one  of  the  horses  was  killed  and  others  injured.  It  appeared  that 
they  were  race  horses  worth  $25,000.  Held,  that  the  liability  of  the  company 
for  the  honses  was  limited  to  $200  each,  the  limitation  in  the  bill  of  lading 
being  just  and  reasonable  and  binding  on  the  plaintiff,  even  though  the  loss 
occurred  through  the  company's  negligence. 

Delivery  by  Carrier.  —  The  carrier  is  bound  to  transport  the 
goods  with  reasonable  dispatch,  and  by  the  prescribed  or  cus- 
tomary route,  and  at  the  termination  of  the  journey  to  deliver 
them  over  to  the  consignee  or  his  authorized  agent  within  a 
reasonable  time. 

Berje  v.  Railway  Co.,  37  La.  An.  468,  held,  that  a  stipulation  in  the  bill  of 
lading  exempting  the  company  from  liability  for  loss  arising  from  delay  for  any 
cause,  is  unreasonable,  and  will  not  relieve  the  carrier  from  liability  for  losses 
caused  by  negligence. 

The  carrier  is  liable  absolutely  to  deliver  to  the  right  party. 
If  he  delivers  to  the  wrong  party,  no  matter  how  cautiously  and 
innocently,  he  is  liable.  Delivery  on  a  forged  order  or  through 
the  fraud  of  a  stranger  will  not  relieve  him. 

In  Odell  V.  Boston  Railroad,  109  Mass.  50,  plaintiff  bought  hay  from  one 
Swasey,  to  be  delivered  to  the  plaintiff  at  the  depot  of  the  defendants,  who  as 
common  carriers  were  to  carry  the  hay  to  plaintiff  in  Boston,  where  it  was  to 
be  weighed.  Swasey  delivered  the  hay  to  defendants  and  directed  them  to 
market  it  in  plaintiff's  name  and  carry  it  to  him.  After  the  hay  reached  Bos- 
ton Swasey  directed  defendants  to  deliver  it  to  a  third  party..  Held,  that  the 
title  passed  to  plaintiff  on  the  delivery  of  the  hay  to  defendants,  and  they  were 
liable  to  him  therefor. 

Powell  V.  Myers,  26  Wend.  (N.Y.)  591,  held,  that  common  carriers  of  pas- 
sengers and  their  baggage  are  liable  for  the  latter  until  its  safe  delivery  to  the 
owner.   The  delivery  of  the  baggage  upon  a  forged  order  will  not  discharge  them . 

When  a  bill  of  lading  has  been  issued  by  the  carrier,  he  must 
deliver  the  goods  to  the  holder  of  it.  He  should,  therefore, 
demand  the  bill  of  the  consignee,  otherwise,  if  it  has  been 
negotiated,  he  runs  the  risk  of  being  required  to  make  good  the 
property  to  a  purchaser  holding  the  bill  of  lading. 

Forbes  v.  Boston  Raihoad,  133  Mass.  154,  held,  that  the  delivery  of  goods  by 
a  common  carrier  to  a  person  unauthorized  to  receive  them  without  requiring 
the  production  of  the  bill  of  lading,  but  relying  upon  such  person's  representa- 


212  BAILMENT 

tion  that  he  is  the  holder  of  it,  renders  the  carrier  liable  to  the  person  entitled 
to  the  possession  of  the  goods  without  regard  to  the  question  of  the  carrier's 
negligence  or  care. 

When  the  carriage  is  by  water  a  delivery  on  the  usual  wharf 
is  sufficient,  but  while  on  the  wharf,  goods  should  be  handled 
with  reasonable  care.  A  railroad  company  may  deliver  the 
goods  at  the  depot  or  freight  house,  and  according  to  the  laws 
of  Alabama,  New  York,  Wisconsin,  Vermont,  Michigan,  Louisi- 
ana, and  many  other  states,  they  must  also  notify  the  consignee, 
and  they  are  liable  as  common  carriers  until  the  consignee  has 
had  a  reasonable  opportunity  to  remove  the  goods. 

In  the  case  of  Moses  v.  Boston  Railroad,  32  N.H.  523",  ten  bags  of  wool 
were  delivered  to  defendant  to  be  transported  to  Boston  and  then  delivered  to 
the  consignee.  The  train  arrived  in  Boston  between  one  and  three  o'clock  in 
the  afternoon,  and  in  the  usual  course  of  business  two  or  three  hours  were  re- 
quired for  unloading.  The  warehouse  was  closed  at  five  o'clock,  and  during 
the  night  it  burned.  Held,  that  the  defendant  was  liable  as  a  common  car- 
rier until  the  consignee  had  had  reasonable  opportunity  during  the  hours  in 
which  such  goods  are  usually  delivered,  of  examining  them  and  taking  them 
away,  after  being  informed  that  they  were  ready  for  delivery.  In  this  case  he 
had  no  such  opportunity  to  take  the  goods,  and  the  defendant  was  still  liable 
as  a  common  carrier. 

Massachusetts,  Iowa,  California,  Pennsylvania,  and  other 
states  hold  that  the  delivery  and  safe  storage  of  the  goods  in 
the  freight  depot  relieve  the  carrier  from  further  liability  other 
than  as  a  warehouseman. 

In  Francis  v.  Dubuque  Railroad  Co.,  25  Iowa  60,  plaintiff  shipped  goods  by 
defendant  road  to  Ackley,  where  plaintiff  resided.  They  arrived  at  8.15  p.m. 
and  were  at  once  unloaded  and  safely  placed  in  defendant's  warehouse 
ready  for  delivery.  That  night  the  warehouse  burned,  and  the  goods  were 
destroyed.  Held,  that  the  liability  of  a  railroad  company  as  a  common  carrier 
terminates  and  the  company's  responsibility  as  a  warehouseman  commences 
upon  the  arrival  of  the  goods  at  the  point  of  destination  and  their  deposit 
in  the  warehouse  of  the  company  to  await  the  convenience  of  the  consignee. 

If  such  carriers  as  express  companies  in  the  cities,  whose 
custom  it  is  to  deliver  to  the  consignee  at  his  residence  or  place 
of  business,  deliver  at  any  other  place  or  store  the  goods  in  the 
depot  as  is  practiced  by  freight  companies,  such  delivery  will  not 
be  sufficient.     This  rule  applies  also  to  draymen  and  teamsters. 


CARRIERS  OF  PASSENGERS  213 

8.     CARRIERS  OF   PASSENGERS 

Definition.  —  A  common  carrier  of  passengers  is  one  who 
transports  persons  from  one  place  to  another  for  hire.  A  pub- 
lic carrier  may  be  both  a  carrier  of  goods  and  of  passengers. 
The  passenger  may  be  carried  by  water  or  by  land.  The  com- 
mon carrier  of  passengers  is  bound  to  receive  and  carry  alike  all 
persons  who  shall  apply  and  are  ready  and  willing  to  pay  for 
their  transportation. 

In  Bennett  v.  Dtttton,  10  N.H.  481,  it  was  held  that  the  proprietors  of  a 
stagecoach  who  hold  themselves  out  as  common  carriers  of  passengers  are 
bound  to  receive  all  who  desire  passage,  so  long  as  they  have  room  and  there 
is  no  legal  excuse  for  a  refusal.  It  is  not  a  legal  excuse  that  they  have  agreed 
with  a  connecting  coach  line  that  they  will  receive  no  passengers  on  certain 
days  from  a  given  point  unless  they  come  on  a  coach  of  said  line. 

Rights  and  Duties.  —  But  the  coach  driver  may  refuse  to  carry 
when  he  has  no  more  room  or  when  the  party  applying  is  not  a 
suitable  person.  He  need  not  receive  a  drunken  person,  a  noto- 
rious criminal,  or  a  person  infected  with  a  contagious  disease. 
Neither  is  he  obliged  to  take  persons  to  a  place  which  is  not  on 
his  route,  or  at  which  he  is  not  accustomed  to  stop. 

Atchison  Railroad  Co.  v.  Weber.,  33  Kans.  543,  held,  that  where  an  unattended 
passenger  becomes  sick  or  unconscious  or  insane  after  entering  upon  a  jour- 
ney, it  is  the  duty  of  the  company  to  remove  him  from  the  train  and  leave  him 
until  he  is  in  a  fit  condition  to  resume  his  journey. 

The  fare  required  of  the  passenger  must  be  reasonable,  and  in 
many  states  it  is  regulated  by  statute.  The  carrier  is  bound  to 
have  means  and  appliances  suitable  to  the  transportation,  and  to 
use  all  reasonable  precautions  for  the  safety  of  passengers.  He 
can  prescribe  reasonable  rules  as  to  showing  tickets,  etc.  The 
carrier  is  not  an  insurer  of  the  lives  and  safety  of  the  passengers, 
but  he  is  held  to  a  high  degree  of  care,  and  will  be  liable  for  even 
slight  negligence.  While  the  carrier  does  not  warrant  the  safety 
of  the  passengers,  he  is  held  to  the  highest  degree  of  care  prac- 
ticable under  the  circumstances. 

In  Ingalls  v.  Bills,  9  Mete.  (Mass.)  I,  plaintiff  was  a  passenger  on  de- 
fendant's coach.     By  reason  of  the  breaking  of  one  of  the  iron  axletrees,  in 


it  4  BAILMENT 

which  there  was  a  small  flaw  that  could  not  be  seen,  he  was  injured.  Held, 
that  defendant  was  not  answerable  for  the  injury  thus  received.  Proprietors 
of  coaches  who  carry  passengers  for  hire  are  answerable  for  injuries  to  pas-- 
sengers  which  happen  by  reason  of  any  defect  in  the  coach  that  might  have 
been  discovered  by  the  most  careful  and  thorough  examination,  but  not  for 
an  injury  which  happened  because  of  a  hidden  defect  that  could  not,  upon 
such  examination,  have  been  discovered. 

In  most  of  the  states  the  carrier  is  not  permitted  to  limit 
his  liability  for  injury  to  the  passenger.  It  is  considered  con- 
trary to  public  policy  to  exempt  the  carrier  from  liability  for 
even  slight  negligence  when  the  lives  and  safety  of  human  beings 
are  concerned. 

Baggage.  —  The  passenger  who  pays  his  fare  to  the  carrier 
is  entitled  to  have  certain  baggage  taken  without  charge,  and 
for  this  baggage  the  carrier  is  liable  as  for  the  carriage  of 
freight.  Baggage  in  this  sense  includes  such  articles  of  per- 
sonal necessity,  convenience,  and  comfort  as  travelers  under  the 
circumstances  are  wont  to  take  on  their  journeys.  It  does  not 
include  merchandise  or  a  stock  of  goods  used  in  the  traveler's 
business. 

In  Pardee  v.  Drew,  25  Wend.  (N.Y.)  459,  plaintiif  took  passage  at  New 
York  on  defendant's  boat  and  brought  on  board  with  him  a  trunk  which  was 
put  with  the  other  baggage.  It  contained  silks  and  other  merchandise  he  had 
purchased  in  New  York  for  his  store.  The  trunk  was  lost,  and  this  action 
was  brought  for  its  value.  Held,  that  defendant  was  liable  as  a  common  car- 
rier for  baggage,  but  it  must  be  such  articles  of  necessity  and  personal  con- 
venience as  are  usually  carried  by  travelers,  and  in  this  case  the  carrier  was 
not  liable. 

In  Dexter  v.  Syracuse  Railroad  Co..,  42  N.Y.  326,  plaintiff  sued  for  the 
value  of  the  contents  of  his  trunk  which  was  lost  by  defendant.  It  con- 
tained, aside  fr-om  his  wearing  apparel,  material  for  two  dresses  purchased  for 
his  wife,  and  also  material  for  a  dress  intended  for  his  landlady.  Held,  that 
the  common  carrier  is  liable  for  the  loss  of  such  property  received  as  baggage 
as  is  designed  for  the  personal  use  of  the  passenger  or  his  family,  but  it  does 
not  include  articles  purchased  for  persons  not  members  of  his  family.  In 
this  case  the  company  was  held  liable  for  all  but  the  dress  intended  for  the 
landlady. 

The  carrier  is  also  liable  for  money  which  the  passenger 
includes  in  his  baggage  for  his  traveling  expenses  and  personal 
use,  not  exceeding  a  reasonable  amount. 


CARRIERS  OF  PASSENGERS  21 5 

Duffy  V.  Thompson,  4  E.  D.  Smith  (N.Y.)  178,  held,  that  a  passenger 
on  a  voyage  from  a  foreign  country  may  Iteep  money  designed  for  small 
personal  expenses  in  his  trunk  while  on  board  ship,  and  hold  the  shipowner 
responsible  for  it. 

If  the  baggage  is  not  delivered  into  the  actual  custody  and 
keeping  of  the  carrier,  but  is  retained  in  the  possession  of  the 
passenger,  the  carrier  is  under  no  such  liability  for  its  safety. 

Carpenter  v.  New  York  Railroad  Co.y  124  N.Y.  53,  held,  that  a  carrier 
was  not  liable  for  the  effects  of  travelers  not  delivered  into  his  custody,  and 
money  retained  at  night  and  placed  under  the  traveler's  pillow  was  not  in 
the  custody  of  the  carrier. 

The  carrier  may  by  special  contract  make  reasonable  modifi- 
cations of  his  liability  for  baggage.  But  the  carrier  can  not 
relieve  himself  wholly  from  liability,  and  the  Hmitation  must  be 
brought  to  the  passenger's  notice  and  must  be  reasonable.  Con- 
ditions limiting  the  carrier's  Uability  to  each  passenger  to  a  given 
amount  have  been  upheld. 

In  Mauritz  v.  Railroad  Co.,  23  Fed.  Rep.  (U.S.)  765,  it  was  held  that  a 
milroad  company  can  not  limit  its  liability  for  the  safe  carriage  of  a  passenger's 
baggage  by  a  notice  printed  upon  the  face  of  a  ticket,  unless  the  passen- 
ger's attention  is  called  to  it  when  purchasing  the  ticket,  or  unless  the  cir- 
cumstances are  such  that  it  would'  be  negligent  of  him  not  to  read  it.  When 
the  passenger  can  not  read  and  the  agent  makes  no  explanation  when  he 
sells  the  ticket,  the  passenger  is  not  bound.  The  clause  in  the  ticket  was 
that  the  company  would  not  be  liable  for  lost  baggage  excepting  wearing 
apparel,  and  then  only  for  a  sum  not  to  exceed  $50. 

The  liability  of  the  carrier  for  the  baggage  does  not  terminate 
until  the  passenger  has  had  reasonable  opportunity  to  take 
charge  of  it  after  it  has  reached  its  destination.  If  it  is  not 
claimed  after  a  reasonable  time,  the  carrier  may  store  it,  and  his 
liability  as  a  carrier  ceases,  he  being  liable  thereafter  only  as  a 
warehouseman. 

Roth  V.  Buffalo  Railroad  Co.,  34  N.Y.  548,  held,  that  when  a  passenger  did 
not  call  for  his  trunk,  but  left  it  in  the  hands  of  the  company  over  night,  with- 
out any  arrangement  with  them,  and  it  was  destroyed  before  morning  by  the 
burning  of  the  depot,  the  company  was  not  liable.  The  common  carrier's 
liability  for  baggage  terminates  within  a  reasonable  time  after  the  arrival  of  the 
baggage  at  the  place  of  destination,  if  the  carrier  is  ready  to  deliver  the  same 
to  the  passenger. 


2l6  BAILMENT 


QUESTIONS   ON   BAILMENT 

1.  Define  bailment.  Distinguish  from  sale.  Who  is  the  bailor  ?  Who 
is  the  bailee  ? 

2.  What  are  the  five  classes  of  bailments  under  the  Roman  law  ? 

3.  Classify  bailments  according  to  recompense. 

4.  What  care  or  diligence  is  said  to  be  required  in  the  case  of  a  bailment 
for  the  benefit  of  the  bailor?  For  what  degree  of  negligence  is  the  bailee  liable  ? 

5.  In  the  case  of  a  bailment  for  the  benefit  of  both  parties,  what  degree  of 
care  is  required,  and  what  degree  of  negligence  renders  the  bailee  liable  ? 

6.  In  the  case  of  a  bailment  for  the  benefit  of  the  bailee,  what  degree  of 
care  is  required,  and  what  degree  of  negligence  renders  the  bailee  liable  ? 

7.  Brown  steals  a  horse,  and  while  riding  it  carefiilly  is  run  into  by  a  run- 
away team  and  the  horse  is  killed.  Brown  was  exercising  the  greatest  care, 
and  was  not  guilty  of  any  negligence  whatever.  Is  he  liable  for  the  value  of 
the  horse  ? 

8.  A,  a  farmer,  intending  to  go  to  town  the  next  day,  promises  B  that  he 
will  take  two  bags  of  wheat  for  him  without  charge.  The  next  morning  he 
starts  away  without  it,  and  B  is  put  to  the  necessity  of  hiring  a  man  to  take  the 
wheat  for  him.    Can  he  recover  damages  from  A  for  breach  of  A's  agreement  ? 

9.  If  in  the  above  case  A  had  taken  B's  wheat  on  his  wagon  and  started  to 
town  with  it,  but  in  loading  it  had  carelessly  put  a  plow  on  the  top  of  it,  in 
consequence  of  which  the  bag  was  torn  open  and  the  wheat  scattered  along 
the  road.     Could  B  have  recovered  of  A  for  the  loss  of  the  wheat  ? 

10.  In  question  8,  if  nothing  was  said  by  the  parties  as  to  whether  or 
not  A  was  to  receive  any  compensation  for  taking  the  wheat,  and  he  had 
been  in  the  habit  of  doing  numerous  little  errands  for  B  without  charge,  which 
would  the  presumption  be,  that  he  was  a  gratuitous  bailee,  or  a  bailee  for  hire  ? 

11.  Bernard,  as  a  favor  to  Webster,  receives  a  sum  of  money  to  keep  for 
him  until  next  day.  He  puts  it  with  his  own  in  his  pocketbook  which  was  in 
his  coat  pocket.  That  night  Bernard's  house  was  robbed,  and  the  pocketbook 
that  also  contained  money  of  his  own  was  taken  from  his  coat,  which  hung  on 
the  foot  of  the  bed.  Was  Bernard  liable  ?  What  degree  of  care  was  required 
of  Bernard  ? 

12.  Nelson  borrows  a  bicycle  from  Wood,  rides  it  to  a  ball  game,  and  leaves 
it  in  the  bicycle  rack  unlocked.  The  bicycle  is  stolen.  It  was  left  in  the  same 
place  with  many  other  bicycles,  but  no  one  was  placed  in  guard  over  it.  Is 
Nelson  liable  to  Wood  for  the  bicycle  ? 

13.  A  borrows  a  horse  of  B  with  which  to  work  his  garden.  He  keeps  the 
horse  two  days,  and  then  sends  it  back.  While  A  had  the  horse  he  cared  for 
it  and  furnished  its  feed.  One  shoe  was  off,  and  he  had  the  horse  shod. 
The  horse  was  injured  during  the  bailment  through  the  slight  negligence  of  .A. 
Was  A  liable  ? 


BAILMENT 


217 


14.  In  the  above  case,  if  the  horse  had  been  injured  by  an  accident  with- 
out any  negligence  or  fault  on  the  part  of  A,  would  A  have  been  liable  ? 

15.  In  question  13,  if  the  horse  had  died  a  natural  death  without  any  fault 
of  A,  would  A  have  been  liable  ? 

16.  Under  what  three  divisions  do  we  consider  bailments  for  mutual 
benefit  ? 

17.  In  question  11,  if  Bernard  was  to  receive  $5  for  caring  for  the  money, 
what  degree  of  care  would  be  required  of  him,  and  for  what  negligence  would 
he  be  hable  ? 

18.  Dodge  employed  a  keeper  of  a  livery  stable  to  board  and  care  for  his 
team.  The  keeper  of  the  stable  left  the  door  open  so  that  one  of  Dodge's 
horses  got  out  and  was  kicked  by  another  horse.  Was  the  livery-stable  keeper 
liable  ? 

19.  A  takes  his  wagon  to  B,  who  represents  himself  to  be  a  wagon  maker, 
and  employs  him  to  repair  it.  B  is  wholly  incompetent  and  does  not  under- 
stand the  business,  and  as  a  result  the  wagon  is  damaged.     Is  B  liable  ? 

20.  After  the  purposes  of  the  bailment  of  the  class  in  question  19  have 
been  accomplished,  what  is  the  duty  of  the  bailee  ?    Of  the  bailor  ? 

21.  What  security  has  the  bailee  for  his  services  ? 

22.  Harris  takes  his  desk  to  a  cabinet  maker  to  be  repaired  and  revarnished. 
After  the  work  is  completed  he  sends  for  the  desk,  and  the  cabinet  maker  refuses 
to  deliver  it  until  he  receives  his  pay,  whereupon  Harris  brings  an  action  to 
recover  the  possession  of  the  desk.  Can  he  succeed  without  paying  for  the 
work  ? 

23.  In  the  above  case,  if  the  cabinet  maker  had  let  Harris  have  the  desk, 
could  he  have  compelled  Harris  to  deliver  it  back  to  him  or  else  pay  him  for 
his  services  ? 

24.  Define  pledge  or  pawn.     Distinguish  from  chattel  mortgage. 

25.  What  kind  of  personal  property  may  be  the  subject  of  a  pledge  ? 

26.  What  is  the  result  when  the  property  pledged  has  been  destroyed  by  fire  ? 

27.  What  degree  of  care  and  diligence  must  the  pledgee  exercise  toward 
the  property  pledged  ? 

28.  Has  the  pledgee  the  right  to  use  the  chattel  pledged  ?     If  so,  when  ? 

29.  If  the  pledgor  makes  default  in  paying  the  debts  secured  by  the  pledge, 
what  rights  has  the  pledgee  ? 

30.  In  case  the  property  pledged  consists  of  bills  or  notes  which  will  soon 
become  due,  what  are  the  rights  of  the  pledgee  ? 

31.  What  are  the  two  principal  examples  of  exceptional  bailments  ? 

32.  Define  an  innkeeper.  Distinguish  an  innkeeper  from  a  boarding-house 
keeper. 

33.  Reed  enters  Porter's  hotel,  and  leaving  his  baggage  with  the  clerk, 
goes  to  dinner.  After  dinner  he  calls  for  his  baggage,  meaning  to  take  the 
three  o'clock  train.  The  baggage  is  lost.  Does  the  relation  of  innkeeper 
and  guest  exist  between  them  ? 


2l8  BAILMENT 

34.  Swift  went  to  Porter's  hotel  as  a  friend  and  guest  of  Porter  for  the 
purpose  of  visiting  him  and  without  paying  anything  for  his  accommodation. 
Did  the  relation  of  innkeeper  and  guest  exist  between  them  ? 

35.  Hewlett  becomes  a  guest  at  Porters  hotel,  and  while  there  the  hotel  is 
destroyed  by  fire.  Porter  is  free  from  negligence.  Is  he  liable  to  Hewlett  for 
baggage  lost  in  the  fire  ? 

36.  In  the  above  case,  if  Hewlett's  baggage  had  been  stolen  by  a  servant  in 
the  employ  of  Porter,  would  he  have  been  liable  ? 

37.  In  question  35,  if  the  hotel  had  been  destroyed  by  a  flood  or  cyclone 
and  Hewlett's  baggage  lost  without  any  negligence  on  Porter's  part,  would 
Porter  have  been  liable  ? 

38.  Porter  gave  notice  to  his  guests  that  he  would  be  liable  for  money  or 
valuables  only  when  they  were  placed  in  the  office  safe,  and  not  when  they 
were  left  in  their  rooms.  Hewlett  left  $1000  in  bank  notes  locked  in  his 
trunk  in  his  room.  This  was  broken  into  and  the  money  stolen.  Was  Porter 
liable  ? 

39.  When  Hewlett  applied  to  Porter  for  accommodations.  Porter  refused  to 
receive  him  unless  he  paid  in  advance.     Had  Porter  this  right  ? 

40.  Hewlett  was  received  as  a  guest  by  Porter,  and  after  staying  three  days 
packed  up  his  trunk  preparatory  to  leaving.  Porter  refused -to  allow  him  to 
remove  his  trunk  from  the  hotel  until  his  bill  was  paid.  Had  Porter  this 
right  ? 

41 .  Define  a  common  carrier. 

42.  What  two  requisites  are  necessary  to  constitute  a  person  a  common 
carrier  ? 

43.  Wooster  shipped  100  barrels  of  flour  to  Allen  &  Co.  When  the  goods 
arrived  the  carrier  refused  to  deliver  them  until  Allen  &  Co.  had  paid  the 
charges.     Had  the  carrier  a  right  to  so  hold  them  ? 

44.  In  the  above  case  suppose  the  carrier  delivered  the  goods  to  Allen  & 
Co.  and  then  looked  to  Wooster  for  the  freight.  Wooster  claimed  that  the 
agreement  between  the  parties  was  that  Allen  &  Co.  should  pay  the  freight. 
Could  the  carrier  hold  Wooster  ? 

45.  In  the  absence  of  a  statute  regulating  the  rates  of  the  railroad  company 
a  common  carrier  charged  one  Johnson  $1.50  a  hundred  for  carrying  freight  a 
certain  distance.  The  Pennsylvania  Coal  Company  had  received  a  special 
rate  of  $1.20  a  hundred,  because  they  were  large  and  important  shippers. 
Had  the  carrier  the  right  to  make  this  distinction  ? 

46.  Suppose  in  the  above  case  the  railroad  company  desired  to  put  Johnson 
at  a  disadvantage  with  his  competitors,  as  the  competitors  shipped  all  of  their 
freight  by  this  carrier  while  Johnson  shipped  some  by  another  carrier. 
Therefore  they  charged  Johnson  $2.80  a  hundred,  while  all  other  shippers  had 
the  regular  rate  of  $1.50  a  hundred.  Had  the  railroad  company  the  right  so 
to  charge  him  ? 

47.  The  Pony  Railroad  Company,  owners  of  a  small  line  of  railroad  being 


BAILMENT  219 

constructed  to  convey  passengers  to  a  pleasure  resort,  were  called  upon  to 
transport  for  plaintift'  a  heavy  boiler.  The  company  refused  to  accejjt  it  on  the 
grounds  that  tliey  had  no  car  sufficient  in  size  to  carry  it  nor  any  facilities  to 
transport  it.     Had  they  the  right  so  to  refuse  it  ? 

48.  In  the  above  aise,  if  the  boiler  was  not  too  large  for  their  equipment, 
had  they  the  right  to  refuse  on  the  ground  that  they  were  carriers  of  passengers 
only,  and  did  not  carry  freight  ? 

49.  What  is  the  object  of  the  interstate  commerce  law  ? 

50.  When  does  the  carrier's  responsibility  for  goods  intrusted  to  him 
begin  ? 

51.  What  is  the  liability  of  a  common  carrier  for  goods  intrusted  to  him  ? 

52.  Name  four  exceptions  to  this  exceptional  liability. 

53.  Plaintiff's  goods  were  lost  by  the  carrier  by  reason  of  lightning  striking 
the  car  in  which  they  were  contained,  and  the  car  being  consumed  by  fire.  Was 
the  carrier  liable  ? 

54.  In  the  above  case,  if  the  fire  was  caused  by  sparks  from  a  fire  along  the 
course  of  the  railway  for  which  the  company  was  not  to  blame,  was  the  com- 
pany liable  ? 

55.  If  the  goods  in  question  53  had  been  lost  through  acts  of  a  mob  of 
strikers,  would  the  carrier  have  been  liable  ? 

56.  If  the  goods  had  been  lost  through  the  act  of  an  army  while  the  coun- 
try was  at  war,  would  the  carrier  have  been  liable  ? 

57.  Conger  ships  a  barrel  of  crockery  which  has  been  but  carelessly  packed 
and  with  no  mark  placed  upon  it  to  give  the  carrier  notice  of  its  contents. 
While  being  handled  in  the  usual  course  of  transportation  the  crockery  is 
broken.     Is  the  carrier  liable  ? 

58.  Clark  ships  a  car  load  of  cattle  from  Chicago  to  New  York  City. 
While  on  the  way  one  of  the  cattle,  being  vicious,  gored  a  number  of  others 
so  that  they  died  fi-om  their  wounds.     Is  the  company  liable  ? 

59.  In  question  54,  if  the  company  had  expressly  contracted  that  it  would 
not  be  liable  for  accidental  fire  not  caused  through  its  negligence,  would  it 
have  been  liable  ? 

60.  In  the  same  case,  if  the  fire  had  been  caused  by  the  gross  negligence 
of  the  company's  employees,  but  it  had  expressly  contracted  not  to  be  liable 
for  fire  from  any  cause  whatever,  would  it  have  been  liable  ? 

61.  The  carrier  receives  certain  goods  to  be  delivered  to  one  J.  R.  Myers 
of  New  York  City.  When  the  goods  reach  there,  a  person  applies  to  the 
freight  office  and  asks  for  the  goods,  stating  that  his  name  is  Myers.  The 
goods  are  delivered  to  him,  and  it  later  transpires  that  the  party  who  applied 
was  not  the  consignee  of  the  goods,  but  a  party  who  obtained  them  fraudu- 
lently.    Can  the  consignee  recover  the  value  of  the  goods  from  the  carrier  ? 

62.  Certain  goods  are  carried  by  the  New  York  Central  Railroad  consigned 
to  one  Powell  at  Albany.  The  goods  reach  Albany  and  are  placed  in  the  depot 
at  four  in  the  afternoon.    A  notice  is  mailed  to  Powell  which  reaches  hira 


220  BAlLMElSrr 

the  next  morning.    Within  that  time  a  fire  occurs  and  the  goods  are  destroyed. 
Is  the  railroad  company  responsible  ?    State  the  holding  in  the  different  states. 

63.  Brown,  a  respectable  person,  applies  to  the  Pennsylvania  Railroad 
Company  for  transportation  on  one  of  their  passenger  trains,  offering  to  pay 
vhe  usual  fare.  Have  they  the  right  to  refuse  him,  there  being  sufficient  room 
on  their  cars  ? 

64.  If  Brown  was  drunk  and  disorderly,  had  they  a  right  to  refuse  him  ? 

65.  What  is  the  liability  of  the  carrier  for  the  lives  and  safety  of  its 
passengers  ? 

66.  What  is  baggage,  and  what  is  the  carrier's  liability  for  a  passenger's 


67.  Drew,  a  passenger  on  the  New  York  Central  Railroad,  had  his  trunk 
checked  and  placed  in  the  baggage  car  of  the  train  upon  which  he  received 
transportation.  The  trunk,  which  was  lost,  contained  his  wearing  apparel,  a 
dress  for  his  wife,  which  he  had  purchased  on  the  journey,  some  presents  for 
his  friends,  and  a  sum  of  $20  in  a  purse,  which  money  he  intended  to  use  on 
his  journey.  Was  the  railroad  company  liable  for  all  of  the  contents  of  this 
trunk  ?     If  not,  for  what  portion  of  it  was  the  company  liable  ? 

68.  If  the  company  had  expressly  contracted  with  Drew  that  their  liability 
for  baggage  should  be  limited  to  $50  and  he  had  had  notic'e  of  this  limitation, 
<vould  they  have  been  liable  for  a  greater  amount  ? 


PARTNERSHIP 
1.    IN   GENERAL 

Definition.  —  Thus  far  we  have  treated  of  individuals  acting 
alone  in  their  business  dealings,  but  in  actual  experience  we 
find  that  the  more  important  business  transactions  and  many  of 
the  smaller  ones  are  undertaken  not  by  single  individuals,  but 
by  several  persons  joining  themselves  together,  and  thus  by  a 
union  of  their  labor,  ideas,  and  capital  they  are  able  to  accom- 
plish better  results  than  if  each  had  conducted  his  business 
alone.  Two  merchants  in  the  same  line  of  business  in  the  same 
neighborhood  may  together  run  a  store  more  economically  than 
it  could  be  run  by  either  separately,  and  at  the  same  time  they 
will  lessen  their  competition.  One  may  have  business  ability, 
an  idea,  or  a  patent,  while  the  other  may  lack  all  of  these  but 
have  the  capital.  Together  they  can  accomplish  results  which 
neither  alone  could  have  attained. 

When  several  persons  thus  join  themselves  together  in 
business  they  do  so  either  by  forming  a  partnership,  a  joint  stock 
company,  or  a  corporation.  A  partnership  is  formed  by  the 
association  of  two  or  more  persons  for  the  purpose  of  carrying 
on  business  together  and  dividing  the  profits  between  them. 
The  members  of  a  partnership  are  called  partners.  The  part- 
ners together  are  said  to  constitute  a  firm. 

Executed  Contract.  —  The  partnership  is  formed  as  the  result 
of  an  agreement,  and  this  agreement  or  contract  of  partnership 
must  be  executed.  An  agreement  to  form  a  partnership  at 
some  future  time  does  not  constitute  the  parties  to  such  an 
agreement  partners.  A  partnership  differs  from  a  corporation, 
which  will  be  considered  later,  in  that  it  is  formed  simply  by  the 
contract  of  the  parties  and  requires  no  authority  from  the  gov- 
ernment to  create   it.     The   contract   of   partnership  may  be 


222  PARTNERSHIP 

entered  upon  by  a  written  agreement,  by  an  oral  agreement,  or 
in  some  cases  by  implication. 

Written  Contract.  —  It  is  a  wise  precaution  to  have  the  agree- 
ment in  writing  and  all  of  the  terms  and  conditions  of  the  part- 
nership expressed.  The  written  agreement,  setting  forth  the 
terms  of  the  partnership  and  signed  by  the  parties  that  are  to 
compose  the  firm,  is  called  articles  of  copartnership.  A  great 
many  different  clauses  may  be  inserted,  depending  upon  the 
actual  agreement  of  the  parties,  but  the  following  is  a  brief 
form  containing  some  of  the  more  common  provisions. 

Articles  of  Copartnership 

This  agreement  made  and  entered  into  this  thirty-first  day  of 
October,  One  thousand  nine  hundred  and  three,  by  and  between 
Charles  Snow  of  Rochester,  N.Y.,  of  the  first  part  and  Edward 
M.  Chapin  of  Batavia,  N.Y.,  of  the  second  part,  witnesseth  as 
follows :  — 

1.  The  said  parties,  above  named,  hereby  agree  to  become 
partners  in  the  business  of  buying  and  selling  dry  goods  under 
the  firm  name  of  Snow  &  Co.,  said  business  to  be  carried  on  in 
the  city  of  Rochester,  or  such  other  place  or  places  as  the  par- 
ties may  hereafter  determine,  and  to  continue  for  the  term  of 
five  years  from  the  date  hereof. 

2.  The  capital  of  the  said  partnership  shall  consist  of  the 
sum  of  ten  thousand  dollars,  to  be  contributed  as  follows :  The 
party  of  the  first  part  shall  contribute  his  stock  of  dry  goods 
and  the  good  will  of  the  business  heretofore  conducted  by  him, 
which  are  together  valued  by  the  parties  hereto  at  the  sum  of 
five  thousand  dollars ;  and  the  party  of  the  second  part  shall 
contribute  the  sum  of  five  thousand  dollars  in  cash.  The  capi- 
tal stock  so  formed  is  to  be  used  and  employed  in  common 
between  the  parties  hereto  for  the  support  and  management  of 
said  business. 

3.  At  all  times  during  the  continuance  of  their  copartnership 
they  and  each  of  them  shall  give  their  time  and  attention  to 
said  business,  and  to  the  utmost  of  their  skill  and  power  exert 


m  GENERAL 


223 


themselves  for  their  joint  interest,  profit,  benefit,  and  advantage, 
and  truly  employ,  buy  and  sell,  and  trade  with  their  joint  stock 
and  the  increase  thereof  in  the  business  aforesaid ;  and  they  shall 
also  at  all  times  during  the  said  copartnership  bear,  pay,  and 
discharge  equally  between  them  all  rents  and  expenses  that  may 
be  required  for  the  management  and  support  of  said  business ; 
and  all  gains,  profits,  and  increase  that  shall  grow  or  arise  from 
or  by  means  of  their  said  business  shall  be  equally  divided,  and 
all  losses  by  bad  debts  or  otherwise  shall  be  borne  and  paid 
between  them  equally. 

4.  Each  of  said  partners  shall  be  at  liberty  to  draw  out  of  the 
funds  of  the  firm  each  month  for  his  private  expenses  the  sum 
of  one  hundred  dollars,  and  neither  of  them  shall  take  any  fur- 
ther sum  for  his  own  separate  use  without  the  consent  in  writing 
of  the  other  partner.  The  sums  so  drawn  shall  be  charged 
against  the  partners  respectively,  and  if  at  the  annual  settlement, 
hereinafter  provided  for,  the  profits  of  any  partner  do  not  amount 
to  the  sum  so  drawn  out  in  that  year,  he  shall  at  once  repay 
such  deficiency  to  the  firm. 

5.  All  the  transactions  of  the  said  copartnership  shall  be 
entered  in  regular  books  of  account,  and  on  the  first  day  of 
January  in  each  year  during  the  continuance  of  this  copartner- 
ship account  of  stock  shall  be  taken,  and  an  account  of  the 
expenses  and  profits  adjusted  and  exhibited  on  said  books;  said 
profits  shall  then  be  divided,  and  one  half  carried  to  the  sepa- 
rate account  of  each  partner.  Either  partner  shall  be  at  liberty 
to  withdraw  at  any  time  the  whole  or  any  part  of  his  share  of 
the  accrued  profits  thus  ascertained  and  carried  to  his  separate 
account.  Each  partner  shall  have  open  and  free  access  to  the 
books  and  accounts  of  the  copartnership  at  all  times,  and  no 
material  or  important  changes  shall  at  any  time  be  made  in  the 
general  business  of  the  firm,  either  in  the  buying  of  stock  or  in 
any  other  respect,  by  either  partner  without  the  knowledge  of 
the  other. 

6.  And  the  said  parties  hereby  mutually  covenant  and  agree, 
to  and  with  each  other,  that  during  the  continuance  of  the  said 
copartnership  neither  of  them  shall  indorse  any  note,  or  other- 


224  PARTIVERSH/P 

wise  become  surety  for  any  person  or  persons  whomsoever, 
without  the  consent  of  the  other  of  said  copartners.  And  at  the 
determination  of  their  copartnership,  the  said  copartners,  each 
to  the  other,  shall  make  a  just  and  final  account  of  all  things 
relating  to  their  said  business,  and  in  all  things  truly  adjust  the 
same ;  and  all  and  every,  the  stock  and  stocks  as  well  as  the 
gains  and  increase  thereof,  which  shall  appear  to  be  remaining, 
either  in  money,  goods,  wares,  fixtures,  debts,  or  otherwise,  shall 
be  divided  equally  between  them. 

In  Witness  Whereof,  the  said  parties  have  hereunto  set 
their  hands  and  seals  this  thirty-first  day  of  October,  1903. 

Charles  Snow.  [l.  s.] 

Edward  M.  Chapin.        [l.  s.] 

The  agreement  should  be  full  and  explicit,  and  many  other 
provisions  may  be  inserted,  as  the  facts  require. 

Oral  Contract.  —  As  we  have  said,  articles  of  copartnership  are 
desirable,  but  not  necessary,  to  the  formation  of  a  partnership. 
Two  neighbors,  each  being  in  need  of  a  grain  drill  on  his  farm, 
may  purchase  one,  each  paying  half,  and  agreeing  that  each  shall 
use  it.  The  result  is  a  partnership  in  the  drill,  and  in  case  it 
should  be  disposed  of  each  would  be  entitled  to  his  half  of  the 
proceeds  unless  the  agreement  between  them  provided  other- 
wise. By  the  statute  of  frauds,  a  contract  of  partnership  for 
over  one  year  must,  in  most  of  the  states,  be  in  writing. 

In  Morris  v.  Peckham,  51  Conn.  128,  plaintiff  agreed  orally  to  assign  to 
defendant  a  one  half  interest  in  an  invention  for  making  patent  screw-drivers, 
defendant  agreeing  to  furnish  the  capital  to  procure  the  patents  and  to  pur- 
chase the  machinery  and  stock,  and  they  were  then  to  engage  in  manufactur- 
ing the  screw-drivers.  After  conducting  the  business  one  year,  defendant 
refused  to  continue  and  to  furnish  more  funds.  Plaintiff  brought  an  action 
to  compel  specific  performance  of  the  partnership  agreement,  claiming  that 
the  partnership  was  to  continue  for  seventeen  years,  the  life  of  the  patent, 
but  the  court  held  that  such  a  contract,  not  being  by  its  terms  to  be  performed 
within  one  year,  is  void  under  the  statute  of  frauds  unless  in  writing. 

Virginia  and  some  other  jurisdictions  hold  to  the  contrary, 
and  expressly  declare  that  a  contract  of  partnership  for  over 
one  year,  when  made  orally,  is  not  within  the  statute  of 
frauds. 


AV  GENERAL  325 

Implied  Partnership.  —  Aside  from  a  partnership  formed  by 
an  actual  agreement,  either  oral  or  written,  which  we  have  just 
discussed,  a  partnership  may  be  implied  from  transactions  and 
relations,  in  which  the  word  "  partnership  "  has  never  been  used, 
but  from  which  the  law  will  imply  a  partnership  whether  it  was 
so  intended  by  the  parties  or  not.  This  implied  partnership 
may  be  an  actual  partnership  by  implication  or  a  partnership  by 
implication  as  to  third  parties. 

Partners.  —  Here  the  difficult  question  arises  as  to  when  a 
partnership  actually  exists,  and  who  are  partners.  The  number 
of  persons  who  may  unite  to  form  a  partnership  is  not  limited, 
but  a  person,  to  become  a  partner,  must  be  competent  to  contract. 
An  infant's  contract  of  partnership,  like  most  of  his  contracts,  is 
voidable,  and  may  be  affirmed  after  he  becomes  of  age,  in  which 
case  he  has  all  of  the  rights,  and  is  subject  to  all  of  the  duties, 
of  a  partner. 

In  Bush  V.  Linthicum,  59  Md.  344,  plaintiff  and  defendant  entered  into  a 
written  agreement  of  copartnership  in  the  grocery  business.  After  the  busi- 
ness had  been  conducted  for  a  time,  plaintiff  brought  an  action  to  dissolve  the 
partnership  and  to  have  the  assets  applied  on  the  debts  of  the  firm.  Defend- 
ant pleaded  that  he  was  an  infant,  but  the  court  held  that  this  did  not  prevent 
the  dissolution  of  the  partnership  and  the  selling  of  its  assets,  and  applying  the 
same  to  the  payment  of  its  debts.  Although  an  infant  may  become  a  partner, 
he  can  not  be  held  for  the  contracts  or  debts  of  the  firm  individually  unless  he 
affirms  them  after  becoming  of  age. 

Kinds  of  Partners.  —  Partners  are  (i)  ostensible  or  public, 
(2)  secret  or  unknown,  (3)  nominal,  (4)  silent,  (5)  dormant,  or 
(6)  special  or  limited. 

Public  Partner.  —  A  public  or  ostensible  partner  is  one  of  the 
active  and  known  parties.  He  is  a  member  of  the  firm  who  par- 
ticipates in  the  business  and  is  held  out  to  the  world  as  such. 

Secret  Partner.  —  A  secret  or  unknown  partner  is  one  who  is 
in  reality  a  partner,  but  conceals  the  fact  both  from  the  public 
and  from  the  customers  of  the  partnership.  This  course  is  often 
taken  when  a  person  risks  money  or  credit  in  a  business,  but 
does  not  wish  to  assume  the  risks  and  liabilities  of  a  partner. 
So  long  as  his  concealment  is  perfect,  he  is  protected ;  but  if  he 
is  at  any  time  discovered  to  be  an  actual  partner,  he  may  be  held 
COM.  LAW — 15 


226  PARTN^ERSHIP 

the  same  as  an  ostensible  partner.     The  actual  fact  of  partner* 
ship  creates  the  liability  in  favor  of  a  creditor  of  the  firm. 

In  Mihno  National  Batik  v.  Bergstrom,  i  Tex.  Civ.  App.  151,  defendant 
and  one  Carter  were  engaged  as  partners  for  one  year  in  dealing  in  hides, 
wool,  and  produce,  under  the  name  of  A.  N.  Carter.  At  the  time  Carter 
opened  the  credit  account  with  plaintiff,  he  informed  plaintiff  that  defendant 
was  his  partner.  The  money  sued  for  had  been  loaned  after  defendant  had 
withdrawn  from  the  firm,  but  this  was  not  known  to  plaintiff.  Defendant  con- 
tended that  as  he  was  a  secret  or  dormant  partner,  he  was  not  bound  to  give 
notice  of  the  dissolution.  Held,  that  he  was  liable  to  plaintiff  for  the  debts 
contracted  after  the  dissolution  of  the  partnership  if  plaintiff  was  not  given  no- 
tice, as  the  credit  was  extended  on  the  strength  of  defendant's  membership  in 
the  firm. 

Nominal  Partner.  —  A  nominal  partner  is  one  who  is  held 
forth  as  a  partner,  with  his  own  consent,  and  is  liable  as  a 
partner  because  he  has  given  his  credit  to  the  firm  and  author- 
ized engagements  and  contracts  on  the  strength  of  this  relation. 
He  may  have  no  interest  whatever  in  the  business;  and  as  between 
himself  and  the  true  owner  there  is  no  actual  partnership,  but 
there  exists  what  we  have  spoken  of  as  an  implied  partnership 
as  to  third  parties,  and  the  nominal  partner  will  therefore  be 
held  to  the  same  liability  as  to  third  parties  to  whom  he  has 
suffered  himself  to  be  held  out  as  a  real  partner. 

In  the  case  oi  Hicks  v.  Cram,  17  Vt.  449,  defendants  were  sued  as  partners 
doing  business  under  the  name  of  Cram  &  Hutchinson.  Defendant  Hutchin- 
son claimed  that  he  was  not  a  partner  and  had  no  interest  in  the  business, 
but  that  his  son  was  the  partner.  It  was  shown  that  defendant  had  held 
himself  out  as  a  partner,  and  when  Cram  had  stated  that  Hutchinson  was  a 
partner  he  had  made  no  denial.  Held,  that  defendant  Hutchinson  was  liable, 
and  that  a  pefton  who  suffers  himself  to  be  held  out  to  the  world  as  a  partner 
in  a  firm  will  be  liable  for  all  debts  which  the  firm  contracts  upon  the  credit 
of  his  being  a  member. 

Silent  Partner.  —  A  silent  partner  is  one  who  as  between  the 
members  of  the  firm  is  an  actual  partner,  but  who  takes  no 
active  part  in  the  business  of  the  firm  except  that  of  recovering 
his  share  of  the  profits.  He  may  be  known  to  the  outside  world 
as  a  partner,  but  in  the  business  itself  he  takes  no  active  part. 

Dormant  Partner.  —  A  dormant  partner  does  not  differ  mate- 
rially from  a  silent  partner,  except  that  he  is  not  known  to  the 


IN  GENERAL 


227 


outside  world.  He  is  both  a  secret  and  a  silent  partner,  being 
both  unknown  as  a  partner  and  inactive  in  the  business. 

Special  Partner.  —  A  special  or  limited  partner  exists  only  in 
those  states  in  which  the  statutes  provide  for  limited  partner- 
ships. By  complying  with  the  statute,  such  a  partner  may  con- 
tribute a  certain  amount  of  money  and  not  become  liable  for 
the  debts  of  the  firm  beyond  the  amount  so  contributed. 

Reality  of  Partnership.  —  In  the  case  of  a  partnership  by 
implication,  which  has  already  been  mentioned,  a  nice  question 
often  arises  as  to  whether  or  not  a  partnership  really  exists. 
The  agreement  or  understanding  between  the  parties  to  a  trans- 
action may  be  such'  that  the  law  will  say  they  are  partners  al- 
though they  did  not  contemplate  becoming  partners,  but  that  the 
effect  of  their  agreement  created  this  relation.  The  early  test 
in  the  English  and  American  courts  was  the  sharing  of  profits. 
A  person  who  was  to  share  in  the  profits  was  a  partner,  but  the 
later  holdings  of  the  courts  have  departed  from  this  rule  and  the 
test  now  in  England  and  in  most  of  the  states  seems  to  be 
the  intention  of  the  parties. 

If  the  parties  either  expressly  or  impliedly  enter  into  an 
association  such  as  the  law  regards  as  a  partnership,  they  will 
be  held  to  stand  in  that  relation.  Whether  such  an  association 
is  intended  to  be  formed  depends  upon  the  facts  in  each  case. 

There  may  be  a  partnership  as  to  third  parties  though  the 
parties  are  not  partners  as  between  themselves,  as  is  the  case 
where  one  holds  himself  out  as  a  partner  and  by  his  conduct 
induces  others  to  trust  the  firm  on  the  strength  of  his  being  a 
partner.  As  to  such  outside  parties,  he  will  be  so  held  although 
the  intent  and  agreement  of  the  parties  between  themselves 
does  not  create  such  a  relation.  _  ^ 

Powell  V.  Moore,  79  Ga.  524,  was  an  action  brought  against  Marbut  and 
Powell,  doing  business  under  the  firm  name  of  S.  P,  Marbut.  Powell  denied 
being  a  partner.  He  contributed  the  use  of  a  dwelling,  storehouse,  and  $200, 
which  he  called  a  loan,  and  Marbut  contributed  his  time  to  the  business  and 
$200.  No  agreement  was  made  as  to  the  rent  of  the  house  or  the  interest  on 
the  money,  but  Powell  was  to  receive  one  half  of  the  profits  of  the  business 
as  profits  and  not  as  compensation  for  the  use  of  the  house  and  money.  Held, 
that  this  constituted  a  partnership  as  to  third  parties. 


228  PARTNERSHIP 

In  Hacked  v.  Stanley,  1 1 5  N.Y.  625,  defendant  entered  into  an  agreement 
whereby  in  consideration  of  his  loaning  one  Gorham  $750  for  use  in  the  heat- 
ing and  ventilating  business,  which  sum  was  secured  by  notes  of  Gorham's 
and  by  a  chattel  mortgage,  etc.,  and  in  the  further  consideration  of  defendant's 
services  in  securing  sales,  also  in  consideration  of  any  other  sums  he  might 
in  his  option  advance,  Gorham  was  to  divide  the  net  profits  of  the  business 
equally  with  him.  Any  money  advanced  was  to  draw  interest.  Gorham  was 
to  have  $1000  for  his  services  in  managing  the  business,  which  was  to  be 
carried  on  in  his  name.  Held,  that  as  to  creditors  of  the  business,  defendant 
was  chargeable  as  a  partner,  and  that  this  was  so  although  the  creditors 
were  ignorant  of  the  agreement  at  the  time  of  giving  the  credit. 

Caldwell  v.  Miller,  127  Pa.  St.  442,  held,  that  an  agreement  between  persons 
engaged  in  business  that  each  is  to  share  directly  in  the  profits  as  such,  con- 
stitutes them  partners  as  to  third  persons,  whatever  their  arrangements  may 
be  between  themselves. 

In  determining  whether  or  not  the  parties  are  partners,  the 
fact  that  they  are  to  divide  the  profits  and  to  share  the  losses 
is  evidence  of  an  intent  to  become  partners,  though  this  does 
not  absolutely  create  such  a  relation.  That  each  party  is  to  have 
a  voice  and  control  in  the  business,  and  that  each  is  to  invest 
his  capital  and  labor  in  the  undertaking  and  is  not  to  occupy 
the  position  of  clerk  or  manager,  are  generally  considered  facts 
sufficient  to  deternrine  the  relation  one  of  partnership.  , 

Meehan  v.  Valentine,  145  U.S.  61 1,  held,  that  one  who  lends  a  sum  of  money 
to  a  partnership,  under  an  agreement  that  he  shall  be  paid  interest  thereon 
and  shall  also  be  paid  one  tenth  of  the  yearly  profits  of  the  partnership  busi- 
ness if  those  profits  exceed  the  sum  lent,  does  not  thereby  become  liable  as  a 
partner  for  the  debts  of  the  firm. 

Manhattan  Brass  Co.  v.  Sears,  45  N.Y.  797,  held,  that  an  agreement  for 
sharing  in  the  profits  of  a  business  is  sufficient  to  constitute  a  partnership  as 
to  third  parties.  It  is  not  necessary  that  the  agreement  be  to  share  in  the 
losses. 

The  authorities  differ  very  widely  as  to  the  rules  that  will 
control  in  determining  who  are  and  who  are  not  partners,  and 
the  only  safe  guide  seems  to  be  to  discover  whether  the  parties 
intended  to  enter  into  a  relation  which  the  law  will  consider  a 
partnership.  If  so,  even  though  they  themselves  did  not  intend 
to  become  partners  and  expressly«stated  they  were  not,  still  they 
will  be  considered  to  be  partners. 


RIGHTS  OF  PARTNERS  BETWEEN  THEMSELVES     22$ 

In  Beecher  v.  Btish,  45  Mich.  188,  Beecher  owned  a  hotel  and  Williams 
agreed  in  writing  to  hire  the  use  of  it  from  day  to  day,  to  Iceep  it  open  as  a 
hotel,  and  to  pay  Beecher  daily  a  sum  equal  to  one  third  of  the  gross  receipts. 
Plaintiff  sold  Williams  a  bill  of  goods  and  then  sought  to  hold  Beecher  as  a 
partner.  The  goods  were  sold  to  Williams,  and  Beecher  was  never  held  out 
as  being  in  partnership  with  him.  Held,  that  their  agreement  did  not  consti- 
tute a  partnership.  The  court  said  that  there  can  be  no  such  a  thing  as  a 
partnership  as  to  third  persons  when  there  is  none  as  between  the  parties 
themselves,  unless  the  third  persons  have  been  misled  by  deceptive  appear- 
ances or  concealment  of  facts. 

In  Farmim  v.  Patchy  60  N.H.  294,  certain  persons  took  a  number  of  shares, 
at  $25  each,  in  an  enterprise  which,  according  to  their  written  agreement,  was 
for  the  purpose  of  starting  a  grocery  store.  They  thought  they  would  not  be 
liable  for  any  debts  except  for  the  amounts  which  they  subscribed,  and  did  not 
consider  that  they  were  partners.  Held,  that  their  arrangement  constituted 
their  relation  that  of  partners. 


2.     RIGHTS  OF  PARTNERS  BETWEEN  THEMSELVES 

Right  to  Choose  Associates.  —  The  first  right  of  a  partner  is 
to  choose  those  with  whom  he  is  to  be  associated  in  this  relation, 
for  as  a  person  can  not  be  compelled  to  go  into  a  partnership 
against  his  will,  so  he  can  not  be  compelled  to  allow  any  one  to 
come  into  the  partnership  without  his  consent.  If  one  partner 
draws  out  or  dies,  his  interest  can  not  be  purchased  by  another 
who  can  come  in  without  the  consent  of  the  other  partners ;  and 
if  they  give  their  consent,  and  he  comes  in,  the  result  is  that  a 
new  partnership  is  created. 

The  case  of  Noonan  v.  Nunan,  76  Cal.  44,  held  that  the  mere  purchase  of 
the  interest  in  the  partnership  property  of  the  estate  of  a  deceased  partner 
does  not  create  a  new  partnership  between  the  purchaser  and  the  surviving 
partner  of  the  old  firm. 

Right  of  Purchaser  or  Inheritor.  —  The  person  who  buys  or 
inherits  the  interest  of  a  partner  in  a  firm  merely  has  the  right 
to  demand  a  settlement  of  the  affairs  of  the  company  and  a 
payment  to  him  of  his  share,  after  the  debts  of  the  firm  are 
paid. 

Partner  may  Sell.  —  Each  partner  has  the  absolute  right  to 
sell  the  whole  or  any  part  of  the  partnership  property  included 


230  PARTNERSHIP 

in  the  regular  course  of  the  business,  but  a  sale  of  any  property 
of  the  partnership  not  ordinarily  kept  for  sale  and  not  within 
the  course  of  the  business  is  not  within  the  power  of  one  part- 
ner. For  example,  one  partner  in  a  grocery  business  can  sell 
the  stock  in  the  regular  way,  but  not  the  fixtures  and  store,  as 
such  sale  would  not  be  in  the  regular  course  of  the  business. 

In  the  case  of  Drake  v.  Thyng,  yj  Ark.  228,  Drake  and  Thyng  were  part- 
ners in  the  brickmakrng  business.  While  Drake  was  away  Thyng  sold  the 
stock  and  plant  to  a  third  party  for  an  insignificant  and  inadequate  sum. 
Drake  brought  this  action  to  set  aside  the  sale.  Held,  that,  while  a  partner 
may  sell  a  part  or  the  whole  of  any  of  the  effects  of  a  firm  which  are  intended 
for  sale,  if  the  sale  is  within  the  scope  of  the  partnership  business,  yet  he  can 
not,  without  the  consent  of  the  other  partners,  dispose  of  the  partnership 
business  itself  or  of  all  the  effects,  including  the  means  of  carrying  it  on,  as 
this  is  beyond  the  range  of  a  partner's  implied  powers. 

Capital.  —  The  capital  of  the  partnership  consists  of  such 
properties  or  amounts  as  are  contributed  to  the  common  fund 
by  the  different  partners  at  the  beginning,  or  that  may  be  put 
in  thereafter.  The  claim  of  each  partner  to  this  partnership 
capital  does  not  extend  to  any  particular  article,  but  to  an  inter- 
est in  the  whole,  consisting  of  a  right  to  share  in  the  proceeds 
after  the  firm  debts  are  paid.  Aside  from  this,  individual  prop- 
erty of  the  partners  may  be  used  in  the  business.  The  store  in 
which  the  business  is  conducted  may  belong  to  one  of  the  part- 
ners, and  he  can  deal  with  this  as  his  own  and  not  as  a  partner. 

In  Nichol  v.  Stewart,  36  Ark.  612,  one  partner  mortgaged  a  certain  number 
of  bales  of  cotton  out  of  the  partnership  crop  for  the  payment  of  an  individual 
debt.  The  mortgagee  had  notice  of  the  partnership.  Held,  that  the  mortga- 
gee had  no  right  to  the  specific  property  but  only  a  right  to  the  ultimate 
interest  of  the  mortgagor  in  the  partnership  effects,  after  all  of  the  firm  debts 
were  paid,  to  an  amount  equal  to  the  value  of  the  cotton. 

Good  Will.  —  The  good  will  of  the  firm  is  partnership  prop- 
erty. The  good  will  is  defined  to  be  the  benefit  arising  from  the 
connection  and  reputation  of  the  firm,  the  fact  that  the  business 
is  established  and  going,  that  it  has  customers  and  is  advertised 
throughout  the  section  to  which  it  looks  for  trade.  The  sale  of 
the  business  a5  a  whole,  including  stock,  fixtures,  etc.,  is  under- 


RIGHTS  OF  PARTNERS  BETWEEIST  THEMSELVES     23 1 

Stood  to  include  the  good  will.  So  the  trade-marks  and  trade 
name  of  a  business  are  property  belonging  to  the  firm  and  pass 
with  the  sale  of  the  business  in  the  same  manner  as  the  good 
will,  although  either  may  be  sold  separately. 

In  Merry  v.  Hoopes,  11 1  N.Y.  415,  Hoopes  and  Merry  were  copanners 
engaged  in  manufacturing  galvanized  iron  under  two  trade-marks,  one  the 
"  Lion  brand  "  and  the  other  the  "  Phcenix  brand."  Upon  the  dissolution  of 
the  firm  defendant  bought  the  business.  Thereafter  plaintiff  brought  this 
action  to  restrain  him  from  the  use  of  the  above-named  trade-marks,  nothing 
having  been  said  about  them  in  the  bill  of  sale.  Held,  that  the  exclusive 
right  to  use  the  trade-marks  belonging  to  the  firm  passed  to  the  defendant. 

In  the  case  of  Williams  v.  Farrand,  88  Mich.  473,  it  was  held  that  an 
assignment  of  all  the  stock,  property,  and  effects  of  a  business,  or  the  exclusive 
right  to  manufecture  a  given  article,  carries  with  it  the  exclusive  right  to  use  a 
fictitious  name  under  which  such  business  has  been  carried  on  and  such  trade- 
marks and  trade  names  as  have  been  used  in  such  business. 

Good  Faith.  —  The  first  duty  of  each  of  the  partners  to  the 
others  is  that  of  exercising  the  utmost  good  faith  toward  them. 
The  reason  for  this  is  apparent  when  we  realize  how  completely 
each  partner  is  at  the  mercy  of  the  others.  Each  partner  really 
acts  as  agent  in  the  transaction  of  the  business  for  the  firm  and 
for  the  other  partners. 

Kimberly  v.  Arms,  129  U.S.  512,  held,  that  if  one  partner  is  the  active  agent 
of  the  finn,  and  as  such  receives  a  salary  beyond  what  comes  to  him  from  his 
interest  as  a  partner,  he  is  clothed  with  a  double  trust  in  his  relations  with  the 
other  partners,  which  imposes  upon  him  the  duty  of  exercising  the  utmost  good 
faith  in  his  dealings ;  and  if  he  obtains  anything  for  his  own  benefit  in  disregard 
of  that  trust,  a  court  of  equity  will  compel  him  to  account  to  the  other  partners 
for  it. 

Individual  Liability.  —  Each  partner  is  chargeable  with  any 
loss  to  the  firm  which  arises  from  his  own  breach  of  duty,  whether 
through  fraud,  negligence,  or  ignorance,  but  he  is  not  liable  to 
the  company  for  loss  arising  from  an  honest  mistake  ot 
iudgment. 

Charlton  v.  Sloan,  76  Iowa  288,  held,  that  although  a  partner  may  act 
unwisely  in  incurring  liabilities  for  the  firm,  the  resulting  loss  can  not  properly 
De  charged  to  him  personally  upon  a  dissolution,  when  it  is  not  shown  that  his 
Acts  were  wanton  or  frauduleat. 


232  PARTNERSHIP 

If  one  partner  takes  a  secret  advantage  of  the  partnership, 
whereby  he  makes  a  profit  for  himself  at  the  expense  of  the 
firm,  he  can  be  required  to  restore  it,  the  courts  holding  that  he 
acted  for  the  partnership  and  it  will  be  entitled  to  the  benefits. 
If  the  lease  of  a  building  occupied  by  a  firm  expires,  one  member 
can  not  secretly  take  out  a  new  lease  in  his  own  name  and  seek 
to  sublet  to  the  firm  at  an  increased  rate.  The  new  lease  taken 
in  the  name  of  one  member  of  the  firm  will  be  declared  by  the 
courts  as  held  by  him  for  the  benefit  and  use  of  the  firm. 

In  the  case  of  Hodge  v.  Twitchell,  33  Minn.  389,  Hodge,  Twitchell,  and 
Ruby  agreed  to  purchase  real  property  together,  each  to  pay  one  third  of  the 
cost  and  to  divide  the  property  equally.  Twitchell  called  their  attention  to  a 
lot  and  advised  its  purchase.  While  they  were  considering  it  he  secretly  made 
an  agreement  with  the  owner  that  if  he,  Twitchell,  found  a  purchaser  for  the 
remainder  of  the  lot  at  $2500,  the  original  price,  the  seller  would  give  him  a 
certain  part  of  the  lot  for  his  services.  Twitchell  then  told  his  partners  that 
a  part  was  sold,  but  the  balance  could  be  obtained  for  $2500,  and  urged  its 
purchase.  It  was  taken  upon  his  recommendation,  and  the  portion  promised 
Twitchell  was  conveyed  to  his  wife,  m  pursuance  of  the  owner's  agreement. 
The  court  decided  that  his  wife  held  the  lot  in  trust  for  Hodge  and  Ruby,  to 
the  extent  of  their  agreed  interest  in  the  venture. 

Records  of  Transactions.  —  The  firm  must  keep  books  of  ac- 
count upon  which  each  member  is  bound  to  enter,  or  have  entered, 
all  of  his  transactions  for  the  firm,  as  each  partner  has  a  right  to 
know  of  all  the  transactions  in  the  business. 

Van  Ness  v.  Van  N'ess,  32  N.J.  Eq.  669,  held,  that  a  member  of  a  firm 
whose  duty  it  is  to  keep  the  accounts,  and  who  claims  that  he  has  omitted  to 
enter  credits  to  which  he  is  entitled,  will  be  required  to  furnish  satisfectory 
proof  of  the  mistake  he  asks  to  have  corrected. 

Compensation.  —  One  partner  is  not  entitled  to  any  special 
compensation  for  his  services  in  the  partnership  unless  it  is  ex- 
pressly provided  for.  Each  partner  is  supposed  to  do  all  that  he 
can  for  the  good  of  the  partnership,  and  whatever  he  does  gives 
him  no  claim  for  extra  compensation  beyond  his  share  of  the  prof- 
its of  the  business  unless  he  has  the  consent  of  the  other  partners. 

Burgess  v.  Badger,  124  111.  288,  held,  that  in  the  absence  of  an  agreement 
to  that  effect,  one  partner  is  not  entitled  to  charge  his  copartners  for  his  ser- 
vices because  he  has  done  more  than  his  just  proportion  pf  the  wprk. 


RIGHTS  OF  PARTNERS  BETWEEN-  THEMSELVES     233 

In  Gregory  v.  Menefee,  83  Mo.  413,  the  claim  of  the  surviving  partner  of 
a  firm  for  compensation  for  his  services  in  closing  up  the  partnership  business 
was  not  allowed.  The  court  held  that  a  surviving  partner  is  not  entitled  to 
any  compensation  for  such  services. 

Heath  v.  Waters,  40  Mich.  457,  held,  that  the  sickness  of  a  partner  is  one 
of  the  risks  incident  to  a  partnership,  and  does  not  give  another  partner  any 
claim  for  personal  services  in  conducting  the  entire  business  unless  the 
articles  of  copartnership  provide  for  such  compensation. 

Partners  may  Sign  Negotiable  Paper.  —  It  is  the  general  rule 
that  one  member  can  bind  the  firm  by  signing  the  firm  name 
as  maker,  indorser,  or  acceptor  of  negotiable  paper  if  it  is  done 
in  connection  with  the  firm  business  and  not  for  a  private  debt 
or  account. 

In  Wagner  v.  Simmons,  61  Ala.  143,  defendants  were  partners  in  the  busi- 
ness of  buying  and  selling  cattle  and  produce.  The  court  held  that  each 
member  had  the  right  to  draw,  accept,  or  indorse  bills  of  exchange  in  the 
firm  name,  and  bind  the  partnership  as  to  third  persons,  dealing  fairly  and  in 
good  faith,  regarding  matters  usually  incident  to  the  business.  It  is  imma- 
terial in  such  a  case,  as  to  persons  thus  dealing  with  one  of  the  partners,  that 
the  other  partner  was  not  informed  of  the  transaction  and  repudiated  it  as 
soon  as  it  came  to  his  knowledge. 

The  power  of  any  partner  to  use  the  firm  name  on  negotiable 
paper  is  presumed,  and  a  stipulation  between  the  partners  that 
certain  members  of  the  firm  shall  not  so  use  it  will  not  affect 
third  persons  having  no  knowledge  of  such  agreement.  But  this 
rule  does  not  apply  if  it  is  obvious  that  the  instrument  is  signed, 
not  for  the  firm,  but  for  the  individual  benefit  of  a  partner. 

Power  of  Majority.  —  We  have  discussed  the  power  of  one 
partner,  and  turning  now  to  the  question  of  what  a  majority  of 
the  partners  can  do,  we  find  that  they  may  control  the  ordinary 
conduct  of  the  firm's  business,  and  have  power  to  act  in  all 
matters  within  the  scope  of  the  partnership  affairs,  but  they  have 
no  power  to  change  the  nature  or  location  of  the  business. 

In  the  case  of  Clarke  v.  Slate,  136  Pa.  St.  408,  it  was  held  that  as  a 
majority  of  the  partners,  while  acting  fairly  and  in  good  faith  and  keeping 
within  the  scope  and  purposes  of  the  partnership,  have  power  to  direct  the 
course  of  the  partnership  affairs,  they  may  give  a  valid  warrant  of  attorney 
in  the  name  of  the  firm,  authorizing  suit  upon  a  contract  made  by  it,  and  this 
notwithstanding  the  dissent  qi  a  mioority. 


234  PARTNERSHIP 

In  the  case  of  Staples  v.  Sprague,  75  Me.  458,  five  persons  had  agreed  to 
cut  and  pack  a  quantity  of  ice  for  sale,  and  after  deducting  all  expenses 
to  divide  the  proceeds  equally.  One  of  the  members,  with  the  consent  and 
approval  of  two  others^  sold  a  large  quantity  of  the  ice.  The  remaining  two 
brought  suit  to  charge  the  others  for  damages  in  selling  the  ice  at  what  they 
claimed  was  too  low  a  price.  Held,  that  the  agreement  constituted  a  partner- 
ship, and  if  there  be  no  fraud  the  majority  of  a  firm  can  make  a  valid  sale  of 
property  belonging  to  the  firm  without  the  consent  of  the  minority. 

3.     LIABILITY  OF  PARTNERS  TO  THIRD   PARTIES 

As  we  have  already  stated,  each  partner  is  liable  for  all  of 
the  debts  of  the  partnership,  and  this  is  so  whether  he  is  a 
secret,  nominal,  or  ostensible  partner. 

In  Richardson  v.  Partner,  36  Mo.  35,  defendants  had  been  doing  business 
under  the  name  of  W.  H.  Jopes.  It  was  shown  that  Farmer  was  a  dormant 
or  secret  partner.  Held,  that  while  the  credit  was  given  to  an  ostensible 
partner,  because  no  other  was  known  to  the  creditor,  yet  the  creditor  may 
also  sue  the  secret  partner  when  discovered,  and  the  credit  will  not  be  pre- 
sumed to  have  been  given  on  the  sole  responsibility  of  the  ostensible  partner- 
Effect  of  Notice.  —  But  this  is  not  so  if  fair  notice  is  given 
that  the  company  will  not  be  liable  for  any  particular  acts  of  a 
partner,  and  if  the  notice  that  such  acts  are  forbidden  is  given 
to  the  person  with  whom  the  partner  deals,  he  can  no  longer 
bind  the  firm. 

In  Yeager  v.  Wallace,  57  Pa.  St.  365,  it  was  held  that  the  partnership 
relation  makes  each  partner  the  agent  of  the  other  when  acting  within  the 
scope  of  his  power,  but  when  the  agency  is  denied  and  the  act  forbidden  by 
the  copartner,  with  notice  to  the  party  assuming  to  deal  with  him  as  agent  of 
the  firm,  the  act  is  then  his  individual  act,  and  not  that  of  the  firm. 

Limit  of  Authority.  —  The  authority  of  a  partner  to  bind  the 
firm  by  contract  is  limited  to  transactions  within  the  scope  of 
the  partnership  business,  and  if  he  seeks  to  charge  the  firm 
with  matters  outside  of  the  scope  of  the  firm's  usual  business, 
he  must  show  special  authority  from  the  other  partners  so  to  do. 
A  partnership  to  work  a  farm  would  not  therefore  give  one 
partner  any  implied  authority  to  draw  bills  of  exchange  or 
borrow  money,  while  a  partner  in  a  mercantile  or  manufacturing 
company  would  have  such  authority. 


LIABILny  OF  PARTNERS  TO   THIRD  PARTIES       235 

In  Randall  v.  Meridet/t,  76  Tex.  669,  Tiernan,  Randall,  Sawyer,  and  Dyer, 
residing  in  Galveston,  made  a  joint  investment  in  mining  property  in  Mexico. 
Tiernan  was  the  manager  in  charge  of  the  work  of  developing  the  mine. 
Assessments  were  made  for  the  work  each  year  for  three  years,  and  when  the 
money  for  each  year  gave  out  the  work  was  to  be  suspended.  In  1885, 
although  the  home  partners  gave  express  orders  that  the  work  should  stop 
when  the  money  gave  out,  Tiernan  kept  up  the  work  and  raised  money  by 
loan  from  Merideth  and  Ailman,  local  bankers,  who  dealt  alone  with  Tiernan, 
not  having  knowledge  of  his  partners.  Upon  suit  being  brought  by  the 
bankers  against  all  the  partners,  it  was  held  that  they  could  not  recover  of 
Randall,  Sawyer,  and  Dyer  without  showing  affirmatively  that  Tiernan  had 
express  authority  from  them  to  borrow  money  on  their  credit  for  the  mining 
enterprise.  The  partners  to  a  mining  enterprise  have  no  implied  power  to 
borrow  money  on  the  credit  of  the  partnership. 

While  the  presumption  is  that  a  partner  has  no  authority  to 
use  the  goods  or  credit  of  the  firm  to  pay  his  personal  debts  nor 
to  buy  goods  for  his  personal  use  with  the  partnership  funds, 
still  he  may  have  express  authority  so  to  do,  and  in  that  case  the 
transaction  is  valid. 

In  Dob  V.  Halsey,  16  Johns.  (N.Y.)  34,  one  Moore  and  plaintiff  were  part- 
ners in  the  lumber  business.  Moore  gave  defendant  some  lumber  belonging 
to  the  firm  in  payment  of  a  personal  debt.  In  an  action  by  plaintiff  to  recover 
the  value  of  the  lumber  the  court  held  that  when  one  partner  delivers  partner- 
ship property  to  a  third  person  in  payment  of  a  private  debt,  and  the  third 
person  knows  it  is  partnership  property,  he  can  not  hold  it  against  the  other 
partners,  but  is  liable  to  pay  the  price  of  the  goods. 

In  Hartness  v.  Wallace,  106  N.C.  427,  Connelly  and  Deitz  were  copartners 
in  the  business  of  selling  wagons  until  they  made  an  assignment  to  Hartness. 
Before  the  assignment  one  Hobbs  purchased  a  wagon  of  them  and  gave  his 
note.  Connelly  assigned  the  note  to  Wallace  in  part  payment  of  his  individual 
indebtedness  to  him.  This  assignment  of  the  note  was  made  without  the 
'-cnowledge  or  consent  of  Deitz.  The  note  was  afterwards  paid  to  Wallace, 
^n  an  action  by  the  receiver  to  recover  this  amount  from  Wallace  it  was  held 
that  the  plaintiff  could  recover. 

In  Guice  v.  Thornton,  76  Ala.  466,  it  was  held  that  when  money  is  bor- 
rowed by  one  partner  on  his  own  individual  credit,  the  subsequent  execution  of 
a  note  for  it  in  the  partnership  name,  without  the  consent  of  the  other  partners, 
is  a  fraud  on  the  partnership,  and  does  not  give  the  creditor  a  right  to  recover 
from  the  firm  on  such  a  note. 

Name.  —  A  partnership  should  adopt  some  particular  name 
under  which  to  do  business.     This  may  be  simply  the  name  or 


236  PARTNERSHIP 

names  of  one  or  more  of  the  partners,  either  with  or  without  the 
words  "and  company  "  added,  or  any  other  designation  that  the 
parties  may  adopt,  but  by  statute  in  New  York  State  the  term 
"  and  company  "  must  not  be  used  unless  it  actually  represents 
a  partner. 

Fraud.  —  The  partners  are  held  liable  for  the  fraud  and  the 
false  representations  of  one  partner  when  they  are  made  in  the 
course  of  the  firm  business. 

In  the  case  of  Taylor  v.  Jones,  42  N.H.  25,  it  was  held  that  one  partner  is 
not  liable  for  the  wrongful  acts  of  another  partner  unless  they  were  done 
within  the  proper  scope  of  the  business  of  the  partnership,  or  were  authorized 
or  adopted  by  him. 

Notice  to  one  Partner  is  Notice  to  All.  —  It  is  a  well-established 
principle  that  notice  to  one  partner  in  the  course  of  the  business 
is  notice  to  all.  An  illustration  of  this  is  the  case  of  partnership 
negotiable  paper  that  has  been  dishonored,  notice  of  which  dis- 
honor to  one  partner  is  notice  to  the  firm. 

In  Tucker  v.  Cole,  54  Wis.  539,  it  was  held  that  where  timber  is  purchased 
by  a  firm,  prior  notice  to  one  member  of  the  firm  that  it  was  cut  from  land  not 
belonging  to  the  vendor  is  notice  to  all  of  the  partners. 

In  Frank  v.  Blake,  58  Iowa  750,  it  was  held  that  where  a  partnership  seeks 
to  recover  as  a  bona  fide  purchaser  of  a  promissory  note,  fraudulently  procured, 
the  burden  is  upon  it  to  show  that  all  of  the  members  of  the  partnership  were 
ignorant  of  the  fraud  at  the  time  of  the  purchase. 

4.     REMEDIES  AGAINST  THE   PARTNERSHIP 

In  the  eyes  of  the  law  a  partnership  does  not  have  an  individ- 
uality of  its  own  like  a  corporation,  but  it  is  looked  upon  as  a 
collection  of  persons  and  must  be  sued  not  in  the  firm  name  but 
in  the  names  of  the  persons  composing  it.  In  some  of  the  states 
this  rule  has  been  changed,  and  partnerships  may  sue  and  be 
sued  in  the  firm  name.  The  members  of  a  partnership  are 
proceeded  against  for  a  debt  of  the  firm  in  the  same  way  that 
one  proceeds  against  an  individual.  When  the  creditors  of  the 
partnership  and  the  individual  creditors  of  the  partners  come  in 
conflict,  a  distinction  is  made  and  the  law  says  they  must  pro- 
ceed in  a  particular  way,  the  object  being  to  give  the  individual 


DISSOLUTION 


237 


creditor  his  due  out  of  the  individual  property  of  the  partner, 
and  the  firm  creditor  his  due  out  of  the  partnership  property. 
If,  after  the  partnership  debts  are  paid,  there  remains  a  surplus, 
the  creditors  of  a  partner  may  proceed  against  this  partner's 
share ;  but  if,  on  the  other  hand,  there  are  not  sufficient  part- 
nership assets  to  satisfy  the  firm  creditors,  but  there  remain 
individual  assets  after  the  individual  creditors  are  satisfied,  such 
surplus  is  liable  for  the  firm  debts. 

Wilder  v.  Keeler,  3  Page  (N.  Y.)  164,  held,  that  upon  the  death  of  one  of  the 
partners  in  a  firm,  a  joint  creditor  of  the  partnership  has  no  claim  for  the  pay- 
ment of  his  debt  out  of  the  estate  of  the  deceased  partner  until  all  the  separate 
creditors  of  such  partner  have  been  paid  out  of  his  estate,  and  the  creditors  of 
the  individual  partners  have  no  claim  upon  the  partnership  property  until  all 
of  the  partnership  creditors  are  satisfied. 

In  case  there  are  no  partnership  assets,  the  firm  creditors  are 
entitled  to  share  in  the  individual  assets  of  any  partner  equally 
with  his  individual  creditors. 

In  Brock  v.  Bateinan,  25  Ohio  St.  609,  it  was  held  that  when  a  partnership 
and  several  members  of  the  firm  are  insolvent  and  there  are  no  partner- 
ship funds  for  distribution  among  the  creditors,  the  creditors  of  the  firm  are 
entitled  to  share  equally  with  the  creditors  of  each  partner  in  the  distribution 
of  his  individual  assets. 

5.     DISSOLUTION 

Duration. — When  the  partnership  is  formed,  the  articles  of 
copartnership  usually  state  how  long  it  shall  continue.  Other 
circumstances,  however,  may  operate  to  change  the  time,  and 
when  the  relation  terminates,  the  partnership  is  said  to  be 
dissolved. 

Forms  of  Dissolution.  —  Dissolution  may  take  place  in  any  one 
of  the  following  ways:  (i)  By  provision  in  the  articles  of  copart- 
nership. (2)  By  the  rnutual  consent  of  all  the  partners.  (3)  By 
the  act  of  one  or  more  of  the  partners.  (4)  By  a  change  in  the 
partnership.  (5)  By  the  death  of  a  partner.  (6)  By  the  decree 
of  a  court  of  equity.     (7)  By  bankruptcy. 

I.  Contract. — When  the  period  for  which  the  partnership 
was  formed  has  elapsed,  it  is  thereupon  dissolved  unless  con- 


238  PARTNERSHIP 

tinued  by  the  parties.  The  partnership  may  be  formed  for  a 
temporary  purpose,  and  in  that  case  when  the  purpose  is 
accomplished  the  partnership  ceases. 

2.  Mutual  Consent.  —  The  partnership  may  be  dissolved  at 
any  time  by  the  mutual  assent  of  all  the  partners,  though  the 
period  for  which  it  was  formed  has  not  elapsed. 

3.  Act  of  a  Partner.  —  The  firm  may  be  dissolved  by  the  act 
of  one  or  more  of  the  parties.  This  is  accomplished  when  one 
partner  makes  an  assignment  for  the  benefit  of  his  creditors  or 
becomes  bankrupt  or,  being  insolvent,  his  interest  is  sold  upon 
execution  to  pay  his  creditors.  In  these  cases  his  property 
passes  beyond  his  control  and  he  can  no  longer  perform  his 
part  as  a  partner.  Also,  where  the  partnership  was  formed  for 
no  definite  period,  but  at  the  will  of  the  parties,  any  partner  can 
terminate  the  relation  by  notice  to  the  other  parties. 

In  the  case  of  Blake  v.  Sweeting,  121  III.  67,  Blake,  Huston,  and  Sweeting 
were  engaged  as  partners  in  manufacturing  brick.  After  continuing  in  the 
business  about  three  years  Huston  went  away,  abandoned  the  business,  and 
wrote  to  Blake,  authorizing  him  and  Sweeting  to  settle  the  business  as  they 
pleased.  Thereafter  Blake  and  Sweeting  formed  a  new  partnership  and  con- 
ducted the  business  themselves.  Held,  that  the  acts  of  Huston  operated  as  a 
dissolution  of  the  old  firm.  A  partnership,  when  not  formed  for  any  definite 
time,  may  be  dissolved  by  any  member  of  the  firm  at  his  pleasure.  The 
withdrawal  of  one  member  is  a  dissolution  of  the  firm. 

4.  Change  in  the  Partnership.  — The  partnership  may  be  dis- 
solved by  a  change  in  the  membership  of  the  firm.  A  partner 
may  withdraw  from  the  firm,  or  he  may  transfer  his  interest  to 
a  stranger.  In  whatever  way  the  members  of  a  partnership 
may  be  changed,  the  act  at  once  terminates  and  dissolves  the 
partnership.  One  partner  may  sell  his  interest  to  another  party 
who  is  satisfactory  to  the  remaining  members  of  the  firm,  and 
they  may  agree  to  take  him  in  as  a  partner.  In  this  case  the 
old  partnership  is  dissolved  and  a  new  one  formed.  After  the 
partner  has  retired  or  sold  out  he  is  still  liable  upon  all  of 
the  contracts  of  the  firm  made  before  dissolution,  and  he  is 
entitled  to  his  share  of  the  assets  of  the  firm  after  the  debts  are 
paid. 


DISSOLUTION 


239 


In  Goodspeed  v.  Wiard Plow  Co.,  45  Mich.  322,  it  was  held  that  a  retiring 
partner  is  bound  by  all  previous  contracts  made  within  the  lines  of  the  busi- 
ness, but  after  the  dissolution  of  the  partnership  he  is  not  bound  by  any 
new  contracts  made  by  his  former  partner. 

Notice.  —  The  retiring  partner,  if  the  business  is  to  be  con- 
tinued by  a  new  firm,  which  may  have  the  same  or  a  somewhat 
similar  name,  will  be  liable  for  the  debts  and  contracts  of  the 
firm  even  after  he  is  out,  if  they  were  entered  into  with  parties 
who  had  dealt  with  the  firm  while  he  was  a  member  and  had  no 
notice  of  his  retirement.  Therefore,  to  render  him  free  from 
Hability  for  the  debts  and  contracts  of  the  new  firm,  he  must 
give  notice  of  the  dissolution  of  the  old  firm.  This  notice 
must  be  given  either  orally  or  in  writing  to  those  who  have  had 
previous  deahng  with  the  old  firm,  for  the  retiring  partner  is 
bound  unless  those  who  have  dealt  with  the  old  firm  can  be 
shown  to  have  had  actual  notice. 

National  Shoe  &"  Leather  Bank  v.  Herz,  89  N.  Y.  629,  was  an  action'  brought 
against  defendant  as  an  alleged  partner  of  the  firm  of  Martin  Herz  &  Co.,  to 
recover  on  four  promissory  notes  indorsed  in  the  name  of  the  firm.  Prior  to 
the  indorsing  of  the  note,  Herz  had  sold  out  to  his  partner,  Rosenberg,  who 
carried  on  the  business  in  the  same  name.  Notice  of  dissolution  was  given 
in  the  papers  and  sent  by  mail  to  persons  who  had  dealt  with  the  firm.  Such 
a  notice  was  sent  to  the  bank,  which  never  received  it.  Held,  that  the  de- 
fendant was  liable.  To  release  himself  he  must  show  that  the  bank  had 
actual  notice  of  the  dissolution. 

But  direct  notice  from  the  firm  or  the  retiring  partner  is  not 
required  if  the  customer  has  actual  knowledge  of  the  withdrawal 
of  the  partner. 

Aside  from  notice  to  former  customers,  notice  to  the  world  is 
necessary  to  enable  the  retiring  partner  to  escape  liability  for 
future  debts  of  the  continuing  firm  or  partner.  The  ordinary 
method  of  giving  such  notice  by  publication  in  a  newspaper 
is  usually  held  sufficient,  but  the  paper  must  be  one  which 
circulates  in  the  vicinity. 

In  Meyer  v.  Krohn,  1 14  111.  574,  it  was  held  that,  as  to  persons  who  have 
never  had  any  business  transactions  with  a  partnership,  notice  of  its  dissolu- 
tion or  the  withdrawal  of  a  member  by  publication  in  a  newspaper  published 
at  the  place  of  business  of  the  firm  is  sufficient,  but  as  to  those  who  hare  had 


240  PARTNERSHIP 

previous  dealings  witli  the  firm  actual  notice  or  its  equivalent  must  be  shown 
to  protect  the  retiring  member  from  liability  for  debts  subsequently  incurred  in 
the  firm  name. 

A  change  in  the  name  of  the  firm  by  which  the  name  of  the 
retiring  partner  is  dropped  and  general  attention  is  called  to  the 
fact  that  the  firm  has  dissolved,  is  sometimes  held  to  be  sufficient 
notice  to  the  general  public  to  protect  the  retiring  partner  against 
future  dealings  of  the  new  firm. 

In  Coggswell  v.  Davis,  65  Wis.  191,  it  was  held  that  a  change  of  a  partnership 
name  which  in  itself  indicates  who  the  individual  partners  are,  may  be  sufficient 
evidence  of  a  dissolution  of  such  partnership  ;  but  when  the  name  under  which 
the  business  is  transacted  gives  no  indication  of  the  names  of  the  persons 
composing  the  firm,  a  change  in  such  name  is  not  notice  of  the  retirement  of 
a  person  who  was  previously  known  to  have  been  a  partner  in  the  business. 

The  new  or  incoming  partner  who  purchases  the  interest  of 
the  retiring  partner  and  becomes  a  member  of  the  new  partner- 
ship is  of  course  liable  for  all  of  the  debts  incurred  after  he 
came  into  the  firm,  but  not  for  any  of  the  old  debts,  unless  he 
expressly  agreed  for  a  consideration  to  assume  them. 

In  Kountz  v.  Holihouse,  85  Pa.  St.  235,  it  was  held  that  an  incoming  part- 
ner may  by  agreement  become  liable  for  debts  contracted  by  the  firm  previous 
to  his  entering  it,  but  the  presumption  is  against  any  such  liability. 

5.  Death  of  a  Partner.  —  Another  change  which  will  work  a 
dissolution  of  the  partnership  is  the  death  of  a  partner.  This  is 
really  a  subdivision  of  the  preceding  class,  as  it  is  a  change  in  the 
partnership.  The  dissolution  of  the  partnership  follows  neces- 
sarily immediately  after  a  partner's  death.  The  surviving  part- 
ners have  the  exclusive  right  to  the  possession  and  management 
of  the  partnership  business  for  the  purpose  of  closing  it  out. 
Frequently  the  articles  of  copartnership  provide  how  the  sur- 
viving partner  shall  close  out  the  business,  and  when  such 
provision  is  made  it  must  be  followed.  The  surviving  partner 
holds  the  partnership  assets  in  trust  for  the  purpose  of  closing 
up  its  affairs,  paying  the  firm  debts,  and  distributing  the  remain- 
ing assets  among  the  partners  or  their  representatives. 

In  Sellers  v.  Shore,  89  Ga.  416,  it  was  held  that  upon  the  death  of  a  partner 
the  title  to  the  personal  assets  of  the  firm  is  in  the  survivor,  who  is  charged 


DISSOLUTION 


241 


with  the  administration  of  the  same,  first  for  the  payment  of  the  partnership 
debts  and  second  for  paying  over  the  deceased  partner's  share  in  the  surplus 
to  hfs  legal  representatives.  Unless  there  is  a  surplus  none  of  the  assets  con- 
stitute any  part  of  the  estate  of  the  deceased. 

6.  Decree  of  a  Court.  —  A  court  of  equity  may  decree  a  dis- 
solution of  the  firm  for  good  cause  upon  the  application  of  one 
or  more  of  the  partners.  This  relief  will  be  granted  when  the 
partnership  was  entered  into  through  fraud  or  for  a  wrongful 
and  illegal  purpose.  After  the  partnership  is  formed  a  dissolu- 
tion may  be  decreed  because  of  the  misconduct  of  one  or  more 
of  the  partners,  but  this  relief  will  not  be  granted  for  any  slight 
cause.  Wild  speculations,  gross  extravagance,  quarrelsome  and 
oppressive  conduct,  habitual  intemperance,  indolence  and  inat- 
tention to  business,  or  any  conduct  which  brings  disgrace  and 
discredit  upon  the  firm,  if  sufficiently  serious,  will  constitute 
grounds  justifying  such  action  by  the  court. 

In  the  case  of  Cottle  v.  Leitch,  35  Cal.  434,  it  was  held  that  when  one  partner 
having  the  management  of  the  partnership  aifairs  makes  false  entries  in  the 
books  and  defrauds  his  copartners  of  a  portion  of  the  partnership  receipts,  the 
partners  thus  defrauded  are  entitled  to  a  dissolution  of  the  partnership  and 
an  accounting. 

In  Loomis  v.  McKenzie,  31  Iowa  425,  it  was  held  that  ill  feeling  and  differ- 
ences between  partners  will  not  justify  the  appointing  of  a  receiver  to  wind  up 
the  affairs  of  the  concern,  when  the  term  for  which  the  partnership  was  created 
has  rot  expired  and  it  does  not  clearly  appear  that  the  parties  would  suffer  loss 
by  continuing  in  possession  of  the  property. 

In  Groth  v.  Payment,  79  Mich.  290,  it  was  held  that  the  denial  by  one 
partner  of  all  rights  of  his  copartners  in  the  partnership  property  and  his  claim 
of  the  right  of  exclusive  possession  and  use  of  it,  entitled  his  copartners  to  a 
dissolution  of  the  partnership. 

The  rule  seems  to  be,  if  it  is  obvious  that  the  parties  can  not 
longer  be  associated  together  with  harmony  and  profit  the  court 
will  decree  a  dissolution  rather  than  cause  the  partnership  to  be 
injurious  to  the  innocent  party.  So  also  the  financial  inability 
of  one  partner  to  fulfill  his  part  of  the  transactions  of  the  firm, 
whether  from  his  fault  or  his  misfortune,  will  be  a  sufficient 
cause  for  dissolution.  Insanity  or  permanent  failure  of  health 
because  of  incurable  disease  are  sufficient  grounds  for  dissolution. 

COM.  LAW — 16 


242  PARTNERSHIP 

In  Raymond  v.  Vaughn,  128  111.  256,  it  was  held  that  the  insanity  ot  a 
partner  does  not  in  itself  work  a  dissolution  of  the  partnership,  but  may  con- 
stitute sufficient  grounds  to  justify  a  court  of  equity  in  decreeing  its  dissolution. 

7.  Bankruptcy .  —  Bankruptcy  of  either  a  partner  or  the  firm 
operates  as  a  dissolution  of  the  partnership.  This  is  also  true 
when  the  firm  or  any  partner  makes  an  assignment  for  the 
benefit  of  creditors. 

6.    JOINT  STOCK  COMPANIES 

Definition.  —  A  joint  stock  company  is  a  form  of  association 
in  appearance  resembling  a  corporation  while  in  reality  it  is 
nothing  more  than  a  partnership. 

Incorporation  is  expensive  in  England,  and  there  the  joint 
stock  company  is  common,  but  in  the  United  States,  where  the 
corporation  is  so  frequently  adopted,  the  joint  stock  company 
is  in  many  states  but  seldom  found. 

As  has  been  said,  joint  stock  companies  resemble  corporations 
in  form.  They  have  oflficers  and  by-laws.  Their  capital  is 
divided  into  shares  which  under  their  by-laws  are  transferable. 
Their  by-laws  generally  regulate  the  mode  of  conducting  their 
business  and  electing  their  officers.  A  member  of  a  joint  stock 
company,  although  he  may  style  himself  but  a  stockholder,  is  a 
partner,  and  as  such  is  liable  to  the  same  extent  and  in  the  same 
manner  as  any  ordinary  partner. 

In  Davison  v.  Holden,  55  Conn.  103,  the  defendants  and  others  associated 
themselves  together  without  incorporation  under  the  name  of  the  Bridgeport 
Cooperative  Association  for  the  purpose  of  procuring  meat  and  provisions  at 
a  lower  rate  for  the  members  of  the  organization.  Sales  were  made  to  persons 
not  members  at  a  higher  rate,  but  no  profit  was  expected  beyond  the  expense 
of  management.  The  members  held  meetings  and  elected  officers.  Held, 
that  the  individuals  composing  the  association  were  liable  personally  as 
partners  for  goods  purchased  by  the  managers  of  the  association  for  its 
benefit.  It  made  no  difference  that  they  did  not  intend  to  become  indi- 
vidually responsible  or  that  they  did  not  know  or  believe  that  they  would  be. 

Sale  of  Shares.  —  It  is  generally  held  that  under  the  by-laws 
of  the  company  a  member  may  sell  or  transfer  his  shares  with- 
out working  a  dissolution  of  the  company  as  would  be  the  result 


PARTNERSHIP 


243 


in  a  partnership.  And  the  death  of  a  member  does  not  work 
its  dissolution.  In  some  of  the  states  joint  stock  companies  are 
given  certain  privileges  by  statute ;  as,  for  instance,  allowing 
them  to  sue  or  be  sued  in  the  name  of  their  president  or  treas- 
urer. The  business  of  a  joint  stock  company  can  not  be  changed 
or  extended  without  the  consent  of  all  the  members,  although  in 
its  ordinary  business  arrangements  a  majority  will  govern. 

QUESTIONS    ON    PARTNERSHIP 

1.  Define  partnership.     What  are  the  objects  of  partnership  relations? 

2.  How  is  a  partnership  formed  ? 

3.  A  and  B  intending  to  engage  in  the  dry  goods  business  agree  orally  to 
invest  an  equal  amount  of  cash  and  give  their  time  to  the  business,  arranging 
to  divide  the  profits  and  losses  equally.  Does  this  oral  agreement  constitute 
a  partnership?     Is  it  advisable  to  form  a  partnership  in  this  way? 

4.  If  in  the  above  case  these  parties  in  their  oral  agreement  had  expressly 
understood  that  the  partnership  was  to  continue  for  five  years,  would  the  agree- 
ment have  been  binding? 

5.  What  is  an  implied  partnership? 

6.  Name  and  define  five  principal  classes  of  partners. 

7.  George  Hicks  and  Charles  Hutchinson  agree  to  engage  as  partners  in 
the  business  of  manufacturing  furniture  under  the  name  of  Charles  Hutchin- 
son, Hicks's  name  not  appearing  in  the  firm  and  he  taking  no  active  part  in 
its  management.  They  buy  lumber,  and  before  it  is  paid  for,  the  firm  fails. 
The  lumber  company  did  not  know  of  Hicks's  partnership  in  the  business,  the 
lumber  being  bought  in  Hutchinson's  name.  Can  they  hold  Hicks  person- 
ally for  the  lumber? 

8.  Grover  and  Martin  have  been  engaged  for  a  number  of  years  in  the  whole- 
sale grocery  business.  They  dissolve  partnership,  and  Grover  retires  from  the 
firm,  though  he  still  allows  his  name  to  remain  in  the  firm.  He  is  around  their 
place  of  business  frequently  and  was  present  when  Martin  stated  to  Edwards 
&  Co.,  a  firm  from  which  they  bought,  that  Mr.  Grover  was  his  partner. 
Grover  did  not  deny  this.     Can  Edwards  &  Co.  hold  him  as  a  partner? 

9.  Stanley  is  doing  business  under  the  name  of  A.  H.  Stanley,  he  and 
Moore  having  an  agreement  whereby  Moore,  who  ov/ns  the  store,  contributes 
the  rent  and  loans  Stanley  $500.  Stanley,  on  the  other  hand,  contributes 
$500  and  his  time  in  conducting  the  business.  It  is  agreed  that  the  profits 
are  to  be  shared  equally.     Are  they  partners  as  to  third  parties  ? 

10.  If  in  the  above  case  Moore  had  merely  furnished  the  store  and  nothing 
else,  and  the  agreement  had  been  that  Stanley  was  to  give  him  one  tourth  of 
the  profits  as  rent,  would  they  have  been  partners  as  to  third  parties? 


244  PARTNERSHIP 

11.  A,  B,  and  C  are  engaged  in  conducting  business  as  copartners.  C 
dies  and  D,  C's  son,  who  is  his  executor  and  heir,  seeks  to  come  into  the 
firm  as  a  partner  and  take  his  father's  place.  Has  he  that  right  ?  What  right 
has  he  ? 

12.  Leland  and  Scott  were  engaged  in  manufacturing  and  selling  shoes. 
Leland,  without  the  knowledge  or  consent  of  Scott,  sold  loo  pairs  of  shoes 
from  their  regular  selling  stock.     Had  he  the  right  ? 

13.  In  the  above  case  had  Leland  the  right  without  the  consent  of  Scott  to 
sell  all  the  shoes  they  had  manufactured  ? 

14.  Suppose  in  question  12  Leland,  without  the  consent  of  Scott,  sold  their 
machinery  and  lasts  used  in  manufacturing  their  shoes.     Had  he  that  right  ? 

15.  A  and  B  were  copartners  in  conducting  a  carting  business  in  which 
they  employed  six  wagons  and  six  teams  of  horses.  A  gave  X  a  mortgage  on 
three  of  the  wagons  to  secure  an  individual  debt.  X  knew  that  the  wagons 
were  partnership  property.  Had  A  the  right  to  take  half  of  the  wagons  as  his 
share  of  the  partnership  assets  to  pay  an  individual  debt  ? 

16.  What  is  the  good  will  of  a  firm  ?  Can  it  be  sold  separately  firom 
the  business  ? 

17.  A  firm  having  been  engaged  in  manufacturing  collars  and  cuffs  under  a 
certain  brand  sell  out  their  business  to  X  and  include  in  -the  sale  all  of  their 
stock  and  machinery.  They  afterwards  seek  to  sell  to  Y  the  trade-mark  or  brand 
under  which  they  had  manufactured  their  collars  and  cuffs.  X  claims  it. 
To  whom  does  it  belong  ? 

18.  Carlton  and  Brown  are  engaged  as  partners  in  buying  and  selling 
produce.  Brown  learns  of  a  man  who  has  a  large  quantity  of  wheat,  and  as 
the  firm  are  looking  for  wheat  and  he  knows  that  they  can  afford  to  pay  $  95 
a  bushel  for  it,  he  goes  to  the  owner  and  tells  him  that  if  he  will  give  him  one 
cent  a  bushel  for  his  services,  he  will  find  him  a  purchaser  for  the  wheat  at  $.95. 
The  owner  agrees,  and  the  firm  buys  the  wheat.  Carlton  learns  of  the  trans- 
action afterwards  and  sues  Brown  for  one  half  of  the  one  cent  per  bushel  re- 
ceived by  him.     Can  he  recover  ? 

19.  A  and  B  are  engaged  in  conducting  a  dry  goods  store.  A  is  taken 
sick  and  is  obliged  to  go  away  for  the  benefit  of  his  health.  During  the  time 
he  is  gone  B  conducts  the  business  alone,  and  later  charges  the  firm  for  extra 
services  in  running  the  business  alone.  Has  he  a  right  to  such  compensation, 
there  being  no  agreement  about  the  same  ? 

20.  A,  B,  and  C  are  partners  in  the  hardware  business.  B  gives  the  firm 
of  Sloan  &  Co.  a  promissory  note,  due  in  60  days,  for  a  bill  of  goods  bought 
by  his  firm.     He  signs  his  note  in  the  firm  name.     Has  he  authority  ? 

21.  In  the  above  case,  suppose  B  gives  the  firm's  note,  payable  in  60  days, 
in  payment  of  his  individual  grocery  bill.     Has  he  the  right  1 

22.  In  question  20  A  and  B  wish  to  buy  a  quantity  of  stoves  for  sale  in  the 
course  of  their  bu.siness.     C  objects.     Have  they  the  right  to  buy  them  ? 

23.  In  question  20  A  and  B,  wishing  to  enlarge  their  stock  and  make  a 


PARTNERSHIP 


245 


general  department  store  of  it,  decide  to  add  a  line  of  crockery,  glassware,  and 
groceries.     C  objects.     Have  they  thfc  right  ? 

24.  A  and  B  were  engaged  as  copartners  in  dealing  in  horses.  A  sold  a 
horse  for  X,  fraudulently  representing  it  to  be  sound,  when  in  fact  it  had  the 
glanders,  a  contagious,  incurable  disease.  X  sued  the  partners  for  fraud. 
Was  B  liable  as  well  as  A .'' 

25.  Randall  and  Cole  were  engaged  in  the  mercantile  business.  In  the 
course  of  their  business  they  received  a  note  from  Darrow  which  they  indorsed. 
When  the  note  became  due  it  was  not  paid  by  Darrow  but  was  protested,  and 
notice  of  non-payment  was  given  to  Randall.  In  a  suit  against  Randall  & 
Cole,  to  hold  them  as  indorsers.  Cole  set  up  the  defense  that  he  had  not  had 
notice.     Could  he  be  held,  or  was  his  defense  good  ? 

26.  In  the  above  case,  when  the  action  is  brought  against  Randall  & 
Cole,  how  should  they  be  sued,  as  a  firm  or  as  individuals  ? 

27.  Keeler  and  Wilder,  dry  goods  merchants,  fail.  The  firm  owns  $5000. 
Keeler  has  individual  assets  amounting  to  $3000,  and  Wilder  has  individual 
assets  amounting  to  $  10,000.  Page,  a  creditor  of  the  firm,  seeks  to  satisfy  his 
claim  out  of  Keeler's  personal  property,  while  Keeler  has  individual  creditors 
whom  he  owes  more  than  the  amount  of  his  property.  Can  Page  so  satisfy 
his  claim  ?     To  what  property  must  he  look  first  ? 

28.  Bates  is  a  personal  creditor  of  Keeler.  Can  he  proceed  against  the 
partnership  property  to  satisfy  his  claim  ?  Can  he  proceed  against  the  indi- 
vidual property  of  Wilder  ? 

29.  Name  the  different  ways  in  which  the  dissolution  of  a  partnership  may 
be  effected. 

JO.  A  and  B  enter  into  articles  of  copartnership,  under  which  they  agree 
to  continue  in  business  as  partners  for  three  years.  At  the  expiration  of  three 
years  does  the  partnership  become  dissolved  ?  Can  the  parties  by  mutual 
assent  dissolve  the  partnership  before  that  time  ? 

31.  In  the  above  case  A  sells  his  interest  in  the  partnership  to  C.  What 
is  the  result  ? 

32.  n  A  dies,  what  effect  has  his  death  upon  the  partnership  ? 

33.  In  question  30,  suppose  A  sells  out  his  interest  to  C,  who  is  accepted  as 
a  partner,  and  the  firm  continues  under  the  old  name  of  A  and  B.  The  new  firm 
of  B  and  C  contracts  with  one  Everetts  for  some  merchandise.  Everetts  had 
previously  sold  to  the  old  firm  and  had  received  no  notice  of  A's  withdrawal, 
although  A  has  published  a  notice  of  dissolution  in  the  paper.  The  firm  of  B 
and  C  fails,  and  Everetts  seeks  to  hold  A  liable.     Can  he  succeed  ? 

34.  If  in  the  above  case  A  had  sent  Everetts  a  notice,  which  he  had  re- 
ceived, could  he  be  held  ? 

35.  If  in  question  33  A  had  mailed  Everetts  a  notice  which  Everetts  had 
never  received,  could  A  be  held  ? 

36.  If  in  question  33  Everetts  had  had  notice  that  A  was  no  longer  a 
partner,  although  it  had  not  been  sent  directly  to  him,  could  A  be  held  ? 


246  PARTNERSHIP 

yj.  If  in  question  33  the  firm  of  A  and  B  had  never  dealt  with  Everetts  be- 
fore, and  notice  of  the  change  of  partnership  had  been  published  in  the  local 
papers,  could  A  be  held? 

38.  In  question  33  could  C  be  held  liable  if  the  contract  had  been  entered 
into  by  the  old  firm  and  C  had  not  expressly  agieed  to  pay? 

39.  Raymond  and  Loomis  are  engaged  in  partnership,  but  do  not  agree. 
Raymond  is  engaged  in  wild  speculations,  is  habitually  intemperate,  and  is 
bringing  the  business  into  disrepute.  The  term  during  which  they  agreed  to 
conduct  their  partnership  has  not  yet  expired.  Has  Loomis  the  right  to  dis- 
solve the  partnership  in  an  equity  court? 

40.  If  in  the  above  case  Raymond  had  become  bankrupt,  would  this  have 
had  any  effect  upon  the  partnership? 

41.  What  is  a  joint  stock  company? 

42.  Twenty  different  persons  organized  a  yacht  dub,  each  taking  one 
share  at  $25.  They  had  certain  by-laws  under  which  they  elected  the  oflScers, 
and  stipulated  that  no  member  of  the  club  should  be  personally  liable  for  its 
debts.  The  club  became  bankrupt,  and  the  creditors  proceeded  individually 
against  the  members  for  the  debts  of  the  dub.    Could  they  be  hdd? 


CORPORATIONS 

I.     IN   GENERAL 

Origin.  —  Such  vast  undertakings  as  the  modern  railroads, 
steamship  lines,  large  manufacturing  plants,  etc.,  which  are 
controlled  by  private  parties,  have  made  it  desirable  and  in  fact 
necessary  for  a  large  number  of  persons  to  join  in  a  single  enter- 
prise that  can  be  more  successfully  promoted  by  means  of  their 
joint  capital  and  endeavor.  There  has  also  arisen  the  need  of 
some  method  of  organization  that  shall  be  free  from  certain 
features  of  the  copartnership  law.  A  necessary  feature  of  the 
organization  is  that  it  shall  survive  the  life  of  any  one  member, 
also  that  the  interest  of  any  member  may  be  sold  or  transferred 
without  affecting  the  organization.  To  interest  people  freely  in 
an  organization  of  this  kind,  it  has  also  been  found  desirable  that 
a  member  shall  not  be  personally  liable  in  the  enterprise  beyond 
the  amount  which  he  invests. 

Under  the  common  law  there  was  no  provision  for  any  asso- 
ciation of  persons  to  meet  these  demands  unless  by  a  special 
permit  or  authority  from  the  government,  known  as  a  charter  — 
a  provision  too  slow  and  costly  to  admit  of  common  commercial 
use.  The  statutes  in  all  of  the  states,  therefore,  provide  now 
for  the  formation  of  corporations,  the  purpose  of  which  is  to 
enable  a  number  of  persons  to  associate  themselves  together 
under  a  corporate  name  with  the  privileges  and  protections  just 
enumerated. 

Definition.  —  A  corporation  is  defined  as  a  collection  of  indi- 
viduals united  by  authority  of  law  into  one  body,  under  a  special 
name,  with  the  capacity  of  perpetual  succession  and  of  acting  in 
many  respects  as  an  individual. 

Corporations  are  in  the  eyes  of  the  law  separate  from  the 
members  who  compose  them.     The  property  of  the  corporation 

347 


248  CORPORATIONS 

is  owned  by  it  and  not  by  the  members  of  the  corporation,  and 
a  conveyance  or  sale  of  such  property  must  be  made  by  the 
corporation,  as  it  can  not  be  made  by  the  members  as  individuals. 

In  Wheelock  v.  Moulton,  15  Vt.  519,  it  was  held  that  the  stockholders,  as 
such,  can  not  convey  the  real  property  of  the  corporation,  though  they  all  join 
in  the  deed.  The  name  and  seal  of  the  corporation  must  be  affixed  by  an 
officer  or  agent  having  authority. 

Suits  in  favor  of  or  against  a  corporation  must  be  brought  by 
or  against  the  corporation  and  not  the  individuals  who  compose 
it  personally.  The  corporation  may  convey  to  or  take  from  its 
individual  members,  and  may  sue  them  and  be  sued  by  them. 

In  Waring  v.  Catawba  Co.,  2  Bay  (S.C.)  109,  it  vk^as  held  that  a  member 
of  a  corporation  may  maintain  an  action  against  such  corporation  on  any  just 
demand. 

The  authority  of  the  government  is  always  necessary  for 
the  creation  of  a  corporation.  No  agreement  among  the  mem- 
bers can  accomplish  such  a  result.  The  rnere  act  of  the 
members  alone  would  result  in  a  partnership.  The  corporation, 
therefore,  being  created  by  the  government,  has  only  such 
powers  as  are  conferred  upon  it  by  its  charter  or  act  of  incor- 
poration. 

Public  Corporations.  —  There  are  several  classifications  of 
corporations,  but  the  only  one  of  sufficient  importance  for  us 
to  consider  here  is  the  division  into  public  and  private  corpora- 
tions. Public  corporations  are  such  as  are  created  for  the 
purposes  of  government  and  the  management  of  public  affairs. 
Cities,  towns,  and  villages  are  illustrations  of  such  corporations. 
The  legislatures  give  them  certain  powers  to  pass  laws  or 
ordinances,  to  build  bridges,  improve  streets,  etc.  They  may 
take  and  hold  property,  and  may  sue  and  be  sued  in  their 
corporate  names. 

Private  Corporations.  —  Private  corporations  are  such  as  are 
created  for  private  purposes  and  for  the  management  of  affairs 
in  which  the  members  are  interested  as  private  parties.  When 
private  individuals  are  interested  in  a  personal  way  in  a  cor- 
poration which  is  of  even  a  public  nature,  as  a  railroad,  bank, 
or  insurance  company,  it  is  a  private  corporation.     Private  cpr- 


IN  GENERAL 


249 


porations  are  also  either  stock  or  non-stock  corporations.  Those 
formed  for  the  pecuniary  profit  of  their  members  generally 
have  a  capital  stock  divided  into  a  certain  number  of  parts 
called  shares  of  stock.  A  member's  interest  is  determined  by 
the  number  of  shares  of  stock  which  he  holds  in  the  company. 
This  stock  is  represented  by  a  written  or  printed  certificate, 
which  can  be  transferred  from  one  person  to  another  without 
the  consent  of  the  other  members  of  the  company. 

Certificates.  —  The  form  of  a  certificate  of  stock  is  somewhat 
like  the  following:  — 


Incorporated  under  the  laws  of  the  state  of  New  York 
No.  130  10  Shares 

THE  MONROE   COUNTY  NURSERY  COMPANY 

Capital  $100,000  Shares  $100  each 

?Ef)ts  certifies  that  George  W.  Ellis  is  the  owner  of  ten  shares,  of  one 

hundred  dollars  each,  of  the  capital  stock  of  THE  MONROE  COUNTY 

NURSERY   COMPANY  of  Rochester,  N.Y.,  transferable  only  on  the 

books  of  the  Company,  in  accordance  with  the  By-laws  thereof,  in  person 

or  by  attorney,  upon  the  surrender  of  this  certificate. 

In  tottness  toljereof ,  the  said  Corporation  has  caused  this  certificate  to 

be  signed  by  its  duly  authorized  officers,  and  to  be  sealed  with  the  seal  of 

the  corporation,  this  second  day  of  September,  1903. 

_         ^  John  Carey,  President. 

'-         -'  William  A.  Willis,  Secretary. 


Non-stock  Corporation.  —  A  non-stock  corporation  is  one  in 
which  there  is  no  stock  to  be  transferred,  and  the  membership 
of  any  individual  depends  upon  the  consent  of  the  other  mem- 
bers. Incorporated  societies  and  mutual  benefit  societies  are 
iikistrations  of  this  class. 

Private  Stock  Corporations.  —  The  class  of  corporations  most 
common  in  this  country  and  to  which  we  will  direct  our  atten- 
tion, is  private  stock  corporations. 

The  following  are  the  powers  and  attributes  of  practically  all 
private  stock  corporations:  (i)  to  have  continuous  succession 
under  a  special  name;  (2)  to  receive  and  grant  property,  enter 
into  contracts,  and  to  sue  and  be  sued  in  the  corporate  name ; 
(3)  to  purchase  and  hold  real  and  personal  property ;  (4)  to  have 


250  CORFORAT/OIVS 

a  common  seal ;  (5)  to  make  by-laws ;  and  (6)  to  limit  the  per- 
sonal liability  of  its  members  for  the  corporation  debts  to  the 
amount  invested. 

Name  and  Perpetual  Succession.  —  The  attribute  of  perpetual 
succession  under  a  special  name  is  essential  to  all  corporations. 
The  corporation  is  not  subject  to  dissolution  by  the  death  or 
withdrawal  of  a  member.  A  member  may  transfer  his  shares 
without  the  consent  of  his  associates,  and  the  transferee  comes 
into  the  corporation  as  a  member  without  in  any  way  changing 
or  affecting  its  existence.  A  necessary  attribute  of  every  corpo- 
ration is  a  corporate  name.  This  is  essential,  as  the  corporation, 
being  distinct  from  its  members,  could  not  otherwise  be  known. 

In  the  case  of  Elgin  Butter  Co.  v.  Elgin  Creamery  Co.,  155  III.  127,  it  was 
held  that  the  issuance  of  a  charter  to  the  "  Elgin  Creamery  Company,"  not- 
withstanding the  previous  licensing  of  the  "  Elgin  Butter  Company,"  does  not 
violate  the  corporation  act,  which  forbids  issuing  licenses  to  corporations 
having  the  same  name. 

In  State  v.  McGrath,  cji  Mo.  355,  it  was  held  that  a  company  would  not 
be  entitled  to  a  charter  under  the  name  of  "  The  Kansas  City  Real  Estate 
Exchange  "  when  there  is  a  duly  incorporated  company  doing  business  under 
the  name  of  "  Kansas  City  Real  Estate  and  Stock  Exchange,"  as  the  names 
are  substantially  the  same. 

Real  Estate.  —  The  power  to  hold  real  estate  is  common  to 
most  corporations,  but  it  is  not  an  essential  to  a  corporation's 
existence.  So  also  the  power  to  use  a  seal  is  ordinarily  included 
in  the  privileges  of  a  corporation,  but  it  is  not  essential,  as  a 
corporation  can  contract  without  a  seal. 

By-laws.  —  The  right  to  make  by-laws  is  a  common  incident 
of  a  corporation's  powers.  It  is  unnecessary  to  make  them 
when  the  charter  is  sufficiently  full  to  provide  for  all  con- 
tingencies, but  usually  the  matters  of  detail  are  not  included  in 
the  charter,  provision  being  made  for  them  in  the  by-laws,  and 
every  private  corporation  has  the  implied  power  to  make  them. 
But  the  by-laws  to  be  valid  must  be  reasonable,  consistent  with 
the  charter,  and  within  the  purposes  of  the  corporation.  They 
are  generally  adopted  by  a  majority  vote  of  the  stockholders, 
and  having  once  been  adopted,  bind  all  of  the  stockholders 
whether  they  have  assented  to  them  or  not. 


m  GENERAL  ijt 

Limited  Liability.  —  One  of  the  most  important  attributes  of  a 
corporation  is  that  which  exempts  the  stockholders  from  liability 
for  the  debts  of  the  corporation.  In  a  partnership,  it  will  be 
remembered,  a  partner  is  personally  liable  for  the  debts  of  the 
firm,  but  this  is  not  so  in  the  case  of  a  corporation  except  when 
by  statute  the  personal  liability  of  a  stockholder  is  increased  to 
a  greater  or  less  extent.  For  instance,  the  stockholder  of  a 
bank  is  by  statute  liable  not  only  for  the  amount  invested  in  his 
stock  but  also  for  a  further  sum  of  the  same  amount.  It  is  called 
a  double  liability  of  the  stockholder. 

Incorporation.  —  As  we  have  already  said,  a  corporation  can 
be  created  only  by  act  of  the  government.  This  act  may  be  the 
enactment  of  a  special  law  which  creates  and  gives  power  to  one 
particular  company.  The  constitutions  of  most  of  the;  states 
prohibit  the  legislature  from  creating  a  corporation  by  a  special 
law  except  in  some  particular  cases.  The  great  majority  of 
corporations  are  formed  under  the  general  law,  which  does  not 
of  itself  create  the  corporation  but  authorizes  persons  to  form  a 
corporation  by  taking  certain  prescribed  steps.  It  generally 
requires  that  articles  of  incorporation  be  executed  by  the  incorpo- 
rators and  filed  in  some  public  office.  These  articles  must  usually 
set  forth  the  names  and  residences  of  the  incorporators,  the  name 
by  which  the  proposed  corporation  shall  be  known,  its  principal 
place  of  business,  the  objects  and  purposes  of  the  association 
(which  must  be  lawful),  the  period  of  time  for  which  it  is  to  exist, 
the  amount  of  capital  stock  and  the  number  of  shares  into  which 
it  is  divided,  the  number  of  directors  and  the  names  of  those 
who  are  to  act  as  directors  until  an  election  is  held. 

Any  person  who  has  the  capacity  to  enter  into  a  contract  may 
be  an  incorporator.  The  statutes  generally  prescribe  the  number 
of  incorporators  necessary  to  organize. 

In  the  matter  of  the  Globe  Mutual  Benefit  Association^  63  Hun  (N.Y.)  263, 
it  was  held  that  a  cooperative  insurance  company,  incorporated  and  having 
by-laws  under  which  losses  are  payable  from  weekly  dues  collected  from  policy 
holders,  can  not  insure  infants.  The  relation  existing  between  the  company 
and  its  members  is  one  of  contract,  and  the  legal  disability  of  an  infant  is 
inconsistent  with  such  relation. 


^s,i  CokPokATio^rs 

In  State  v.  Crztckett.  37  Minn.  13,  a  statute  provided  that  the  articles  of 
incorporation  shall  be  signed  by  any  number  not  less  than  nine.  So  articles 
of  incorporation  signed  by  but  two  were  invalid. 

In  most  of  the  states  a  certain  number  of  the  incorporators 
are  required  to  be  residents  of  the  state  in  which  the  company 
is  incorporated. 

2.     POWERS  AND   LIABILITIES  OF  CORPORATIONS 

Powers  Limited.  —  A  corporation  has  only  such  powers  as 
are  conferred  upon  it  by  its  charter  or  articles  of  incorporation. 
These  powers  may  be  expressly  conferred,  or  they  may  b^  im- 
plied, either  because  they  are  incidental  to  a  corporate  existence, 
as  the  right  of  successor  and  the  right  to  have  a  corporate  name, 
or  because  they  are  necessary  in  order  to  exercise  the  powers 
expressly  conferred. 

In  Downing  v.  Mt.  Washington  Road  Co.,  40  N.Hr230,  a  charter  which 
gave  defendant  the  authority  to  make  and  keep  in  repair  a  road  to  the  top  of 
Mt.  Washington,  to  take  toll  of  passengers  and  carriages,  to  build  and  own 
toll  houses,  and  to  take  land  for  a  road,  was  held  not  to  authorize  the  corpora- 
tion to  establish  a  stage  and  transportation  line,  nor  to  buy  carriages  and  horses 
for  that  purpose.  Corporations  have  no  powers  except  such  as  are  given 
them  by  their  charter,  or  such  as  are  incidental  and  necessary  to  carry  into 
effect  the  purposes  for  which  they  were  established. 

Implied  Powers.  —  The  powers  that  are  incidental  to  a  corpo- 
rate existence  and  that  will  always  be  implied,  are  these :  to  have 
perpetual  succession  during  the  life  of  the  corporation,  to  have  a 
corporate  name  by  which  to  contract  and  to  sue  and  be  sued,  to 
purchase  and  hold  real  and  personal  property,  to  have  a  common 
seal,  and  to  make  by-laws. 

A  corporation  has  also  the  implied  power  that  is  reasonably 
necessary  for  the  execution  of  the  powers  expressly  granted  and 
not  expressly  or  imphedly  excluded.  A  corporation  generally 
has  the  impHed  power  to  borrow  money  whenever  the  nature  of 
its  business  renders  it  necessary  or  expedient  to  do  so. 

In  IVelson  v.  Eaton,  26  N.Y.  410,  it  was  held  that  an  insurance  corporation, 
in  the  absence  of  any  statutory  restriction,  has  the  power  to  borrow  money 
and,  as  incident  thereto,  the  power  to  transfer  its  assets  in  trust  as  security  for 
the  loan. 


POWERS  AND  LIABILITIES  OF  CORPORATIONS       253 

In  Bradbury  v.  Boston  Canoe  Club,  153  Mass.  77,  it  was  held  that  a  corpora- 
tion formed  for  the  purpose  of  encouraging  athletic  exercises  has  the  power  to 
borrow  money  for  building  a  club  house  upon  lands  leased  by  it,  under  the 
provisions  of  the  statute  that  such  a  corporation  may  hold  real  and  personal 
estate  and  may  purchase  or  erect  suitable  buildings  for  its  accommodation. 

It  also  has  the  implied  power  to  make,  indorse,  or  accept  bills 
of  exchange  and  promissory  notes,  if  such  is  the  usual  or  proper 
means  of  accomplishing  the  results  for  which  it  was  created. 

In  Moss  V.  Averell,  10  N.Y.  449,  a  corporation  organized  for  the  purpose 
of  raising  and  smelting  lead  ore,  was  held  to  be  a  corporation  having  power  to 
purchase  property  necessary  for  carrying  on  the  business  and,  unless  expressly 
prohibited  by  statute,  can  give  promissory  notes  in  payment  for  such  purchases. 

To  sell  or  mortgage  real  property  owned  by  it  is  another  im- 
plied power  of  a  corporation,  except  in  the  case  of  railroads  and 
other  companies  of  a  public  nature. 

In  Dupee  v.  Boston  Water  Power  Co.,  1 14  Mass.  37,  it  was  held  that  a  corpo- 
ration chartered  with  power  to  purchase  and  hold  water  power,  created  by  the 
erection  of  dams,  and  to  hold  real  estate  may,  when  its  water  privileges  can  no 
longer  be  profitably  used,  sell  its  land. 

But  a  corporation  has  no  implied  power  to  enter  into  a  contract 
of  partnership  or  suretyship. 

In  Mallory  v.  Hanaur  Oil  Works,  86  Tenn.  598,  an  agreement  between 
corporations  engaged  in  manufacturing  cotton-seed  oil,  to  select  a  committee 
composed  of  representatives  of  each  corporation  and  to  turn  over  to  this 
committee  the  properties  and  machinery  of  each  company,  so  that  the  busi- 
ness of  each  might  be  operated  and  managed  for  a  specified  time  by  this  com- 
mittee for  the  common  benefit,  the  losses  or  profits  to  be  shared  in  certain 
proportions,  was  held  to  be  a  contract  of  partnership.  A  partnership  contract 
is  not  within  the  express  or  implied  power  of  a  corporation  and  is  void  even 
though  authorized  by  both  stockholders  and  directors. 

In  Central  Railroad  Co.  v.  Smith,  76  Ala.  572,  it  was  held  that  the  Central 
Railroad  &  Banking  Co.  of  Georgia,  which  was  authorized  by  its  charter  to 
construct  and  operate  a  railroad  between  the  cities  of  Savannah  and  Macon 
and  to  organize  and  carry  on  a  banking  business,  has  no  power,  express, 
implied,  or  incidental,  to  purchase  and  run  a  steamboat  on  the  Chattahoochee 
River,  which  is  no  part  of  its  route,  nor  to  form  a  partnership  with  a  natural 
person  for  carr)dng  on  that  business. 

As  a  general  rule  it  may  be  said  that  when  a  corporation  is 
given   general   authority  to  engage  in   business,  it  takes   the 


254  CORPORATIONS 

powers  of  a  natural  person  to  make  all  the  necessary  and  proper 
contracts  to  enable  it  to  attain  its  legitimate  objects. 

In  Wright  v.  Hughes,  1 19  Ind.  324,  it  was  held  that  a  corporation  organized 
as  a  life  insurance  company  has  power  to  borrow  money  and  secure  its  payment 
by  mortgaging  its  real  estate.  When  general  authority  is  given  a  corporation 
to  engage  in  business,  it  takes  the  power,  in  the  absence  of  charter  restraint, 
just  as  a  natural  person  enjoys  it  with  all  of  its  incidents,  and  may  borrow 
money  to  attain  its  legitimate  objects  the  same  as  an  individual. 

Acts  Ultra  If  ires.  —  When  a  corporation  performs  acts  not 
within  its  power  to  perform,  the  acts  are  said  to  be  ttltra  vires. 
An  ultra  vires  contract,  if  executory,  can  not  be  enforced ;  but 
most  courts  hold  that  if  the  defense  of  ultra  vires  will  work  an 
injustice,  it  will  not  be  allowed,  and  this  is  also  true  if  the  party 
seeking  to  enforce  the  contract  has  performed  his  part 

In  Nassau  Bank  v.  Jones,  95  N.Y.  115,  plaintiff,  the  bank,  subscribed 
for  stock  in  a  railroad  corporation  and  in  this  action  sued  for  its  share  of  the 
profits.  Held,  that  the  plaintiff  was  not  authorized  to  make  such  a  contract, 
and  the  courts  would  not  enforce  it. 

Liability  for  Acts  of  Agents.  —  A  corporation  is  liable  to  the 
same  extent  as  a  natural  person  for  the  frauds  and  wrongs 
of  its  agents  and  servants,  committed  in  the  course  of  their 
employment. 

In  Goodspeed  v.  Bank,  22  Conn.  530,  plaintiff  brought  an  action  against  the 
defendant,  a  banking  corporation,  for  damages  for  maliciously  bringing  vexa- 
tious and  unjust  lawsuits  against  plaintiff.  The  defense  was  that  a  corpora- 
tion was  not  liable  for  such  a  wrong,  but  the  court  held  that  a  suit  of  this 
nature  may  be  maintained  against  a  corporation. 

3.     DISSOLUTION   OF  A  CORPORATION 

A  private  corporation  may  be  dissolved  in  any  one  of  four 
ways : — 

1.  By  the  expiration  of  its  charter. 

2.  By  the  surrender  of  its  charter  with  the  consent  of  the 
state. 

3.  By  an  act  of  the  legislature  repealing  its  charter,  under 
the  power  reserved  by  the  state  when  granting  the  charter. 


DISSOLUTION  OF  A   CORPORATION  255 

4.  By  the  forfeiture  of  its  franchise  or  charter,  upon  the 
judgment  of  a  proper  court,  for  misuse  or  non-use  of  its  powers. 

1.  Expiration  of  Charter.  —  The  charter  usually  stipulates 
that  the  corporation  shall  be  formed  for  a  certain  time,  as  for 
twenty  or  fifty  years.  When  this  period  expires,  the  association 
no  longer  has  an  existence,  and  is  therefore  dissolved. 

Sturges  V.  Vanderbilt,  73  N.Y.  384,  held,  that  upon  the  expiration  of  the 
term  of  existence  of  a  corporation  as  limited  by  its  cliarter  it  becomes  extinct 
and  no  formal  decree  of  dissolution  is  necessary. 

A  charter  when  granted  to  the  corporation  and  accepted  by 
it  constitutes  a  contract  between  the  state  and  the  corporation. 
This  contract  exists  under  the  clause  in  our  federal  constitution 
prohibiting  any  state  legislature  from  passing  a  law  impairing 
the  obligation  of  the  contract.  The  state  can  not,  therefore, 
repeal  the  charter  of  a  company  unless  it  has  expressly  reserved 
that  right  or  unless  the  corporation  assents  thereto. 

In  Ruggles  v.  People,  91  III.  256,  a  railroad  company  was  in  its  charter 
expressly  granted  the  right  to  fix  the  rates  of  toll  to  be  charged.  This  was 
held  not  to  confer  unlimited  power,  but  only  the  right  to  charge  a  reasonable 
rate,  and  a  statute  fixing  what  is  a  reasonable  maximum  rate  does  not  impair 
the  contract  contained  in  the  charter.  The  charter  of  a  railway  corporation 
is  a  contract  between  it  and  the  state  by  which  it  may  exercise  the  rights  and 
privileges  conferred  until  the  expiration  of  its  charter,  unless  by  some  act  it 
shall  forfeit  its  privileges  and  franchise,  and,  under  the  federal  constitution, 
the  obligation  of  such  contract  can  not  be  impaired  by  subsequent  legislation. 

2.  Surrender  of  Charter.  —  The  dissolution  may  be  effected 
by  the  association  surrendering  its  charter,  but  the  charter  being 
a  contract  between  the  state  and  the  association  this  can  be  done 
only  with  the  consent  of  the  state.  The  statutes  generally  pro- 
vide certain  formalities  which  must  be  compUed  with  before  the 
dissolution  will  be  granted. 

3.  Repeal  of  Charter.  —  The  state  may  institute  a  suit  in  the 
proper  court  to  cause  a  corporate  charter  to  be  forfeited.  The 
ground  for  such  a  suit  is  the  abuse  or  misuse  of  the  corporate 
powers,  or  the  neglect  or  non-use  of  the  same.  But  the  mere 
abuse  or  misuse  alone  does  not  work  a  forfeiture  of  the  charter. 
This  results  only  from  the  judgment  of  the  court  after  a  hearing 


2S6  CORPORATIONS 

in  which  the  corporation  has  a  chance  to  appear  and  present  its 
side  of  the  case.  A  forfeiture  will  be  decreed  by  the  courts 
when  the  corporation  is  guilty  of  acts  or  has  omitted  to  do 
certain  things  which  by  statute  are  expressly  made  a  cause  of 
forfeiture  of  its  franchise. 

People  V.  North  River  Sugar  Refining  Co.,  121  N.Y.  582,  is  one  of  the 
famous  trust  cases.  The  defendant  had  entered  into  an  agreement  with  other 
sugar  refineries  which  constituted  a  partnership  between  them,  whereby  the 
control  of  their  several  businesses  was  to  be  under  one  board  of  managers, 
and  the  profits  were  to  be  divided  according  to  a  certain  proportion.  Held, 
that  such  action  was  in  excess  of  its  corporate  powers,  illegal  and  contrary  to 
public  policy,  and  so  authorized  a  dissolution  of  the  corporation.  The  court 
in  the  course  of  its  opinion  said:  "To  justify  forfeiture  of  the  corporate  exist- 
ence the  transgression  on  the  part  of  the  corporation  must  be  not  merely 
formal  or  incidental,  but  material  and  serious,  and  such  as  to  harm  or  menace 
the  public  welfare ;  for  the  state  does  not  concern  itself  with  the  quarrels  of 
private  litigants.  It  furnishes  for  them  sufficient  courts  and  remedies,  but 
intervenes  as  a  party  only  where  some  public  interest  requires  its  action." 

4.  Forfeiture.  —  Continued  neglect  to  exercise  rights  under 
corporate  franchises  and  a  failure  to  perform  the  implied  con- 
ditions upon  which  the  charter  was  granted  amount  to  a  non- 
user,  for  which  the  charter  may  be  forfeited^ 

State  v.  Atchison  Railroad  Co.,  24  Neb.  143,  held,  that  when  a  railway 
company  without  authority  of  law  leases  its  road  to  another  railway  company 
with  all  of  its  rights,  property,  and  franchises,  for  a  long  period  of  time,  it 
thereby  abandons  the  operation  of  its  road  and  is  subject  to  forfeiture. 

Combinations  with  other  corporations  to  form  an  unlawful 
trust  or  monopoly  is  sufficient  ground  for  a  dissolution.  This 
is  illustrated  in  the  case  of  the  People  v.  North  River  Sugar 
Refining  Co.y  just  quoted. 

Distilling  Co.  v.  People,  156  III.  448,  was  an  action  brought  to  dissolve  the 
Distilling  and  Cattle  Feeding  Co.,  which  had  been  formed  for  the  purpose  of 
taking  over  the  plants  of  five  or  six  other  distillers  and  running  them  under 
one  head,  the  profits  to  be  divided  among  the  several  stockholders.  Held, 
that  a  charter  authorizing  a  corporation  to  engage  in  a  general  distilling  busi- 
ness, and  to  own  the  property  necessary  for  that  purpose,  gives  it  no  power  to 
enter  into  a  scheme  of  getting  into  its  hands  all  the  distilleries  of  the  country 
and  establishing  a  virtual  monopoly  of  the  business. 


MEMBERSHIP  IN  A   CORPORATION  257 

Method  of  Dissolution.  —  The  effect  of  the  dissolution  is  that 
thereafter  the  corporation  no  longer  exists  for  any  purpose,  but 
the  statutes  in  practically  all  of  the  states  now  make  provisions 
under  which  the  business  of  dissolved  corporations  may  be 
liquidated  and  settled  and  the  rights  of  stockholders  and  cred- 
itors may  be  adjusted.  The  usual  method  of  doing  this  is  the 
appointment  of  a  receiver  to  wind  up  the  corporate  affairs,  col- 
lect bills  due  to  the  corporation,  and  pay  its  creditors,  after 
which  the  remainder  is  divided  among  the  stockholders,  accord- 
ing to  the  amount  of  stock  they  hold. 

Mason  v.  Pewabic  Mining  Co.,  133  U.  S.  50,  held,  that  on  the  dissolution 
of  a  corporation  at  the  expiration  of  the  term  of  its  corporate  existence,  each 
stockholder  has  the  right,  as  a  general  rule,  to  have  the  corporate  property 
converted  into  money,  whether  it  be  necessary  for  the  payment  of  debts  or 
not. 

4.    MEMBERSHIP  IN   A  CORPORATION 

Stockholders.  —  Membership  in  a  corporation  is  acquired  by 
the  ownership  of  one  or  more  shares  of  the  capital  stock  in  a 
private  stock  corporation.  This  may  be  acquired  by  subscrip- 
tion to  the  capital  stock  either  before  or  after  incorporation,  by 
purchase  from  the  corporation,  or  by  a  transfer  from  the  owner. 
The  certificate  of  stock,  the  form  of  which  is  given  on  page  249, 
is  a  written  acknowledgment  of  the  interest  of  the  holder  in  the 
corporation.  When  the  stock  is  subscribed  for  after  the  incor- 
poration of  the  company,  it  is  simply  a  contract  between  the 
corporation  and  the  subscriber. 

In  Greer  v.  Railwdy  Co.,  96  Pa.  St.  391,  Greer  was  soliciting  subscriptions 
for  the  building  of  a  railway,  and  took  a  subscription  book,  signed  therein 
himself,  and  persuaded  others  to  subscribe.  He  kept  the  book  about  six 
months,  and  then,  because  of  a  disagreement  with  the  company,  he  cut  out 
his  own  name  from  the  book  and  returned  it  to  the  company.  Held,  that  by 
placing  his  name  in  the  book  he  had  perfected  a  contract  with  the  company, 
and  was  just  as  much  bound  as  though  he  had  left  his  name  in  the  book. 

Stock  Subscriptions. — The  subscriptions  of  several  persons 
to  an  agreement  to  take  stock  in  a  corporation  thereafter  to  be 

COM.  LAW — 17 


258  CORPORATIONS 

formed,  is  a  continuing  offer  to  the  corporation  to  be  formed, 
which  may  be  accepted  by  the  corporation,  and  is  binding. 
The  deUvery  of  the  certificate  is  merely  evidence  of  the  owner- 
ship of  the  shares,  and  is  not  necessary  to  make  a  subscriber  a 
stockholder.  A  stockholder  has  the  right  to  inspect  the  books 
and  papers  of  the  corporation  if  he  has  a  reason  so  to  examine 
them. 

In  Phcenix  Iron  Co.  v.  Commonwealth,  113  Pa.  St.  563,  a  stockholder  wish- 
ing to  prepare  a  bill  setting  forth  certain  grievances  against  the  corporation, 
asl<ed  to  see  the  papers  and  books  of  the  company.  Held,  that  the  books 
and  papers  of  a  corporation  are  the  common  property  of  the  stockholders,  and, 
unless  the  charter  provides  otherwise,  a  stockholder  has  the  right,  at  proper 
times,  to  inspect  them  personally,  and  with  the  aid  of  a  disinterested  expert 
to  make  extracts  from  them  for  a  definite  and  proper  purpose. 

Dividends.  —  Out  of  the  surplus  or  net  profits  of  the  corporate 
business  the  directors  may  vote  a  dividend.  This  is  a  certain 
per  cent  upon  the  capital  stock,  and  when  the  dividend  is  declared 
the  stockholders  are  entitled  to  their  respective  shares.  Until 
such  dividend  is  declared,  a  stockholder  has  no  legal  right  to  a 
share  of  the  profits,  although  upon  its  being  wrongfully  with- 
held a  suit  in  equity  may  be  brought  to  compel  the  corporation 
to  declare  a  dividend. 

In  Hyatt  v.  Allen,  56  N.Y.  553,  plaintiff  transferred  to  defendant  twenty 
shares  of  stock  of  a  corporation  under  an  agreement  by  which  all  profits  and 
dividends  upon  said  stock  up  to  January  i,  1872,  were  to  be  paid  to  plaintiff. 
No  dividends  were  declared  until  April  g,  1872.  In  an  action  to  recover  a  part  of 
this  dividend  as  having  been  earned  before  January  i.  it  was  held  that  plain- 
tiff was  not  entitled  to  any  part  of  it.  A  stockholder  has  no  legal  title  to 
the  profits  until  a  dividend  is  declared. 

Preferred  Stock.  —  The  dividend  declared  must  be  equal  on 
all  the  stock  except  where  a  part  of  the  stock  is  preferred.  This 
means  that  a  certain  part  of  the  capital  stock  is  declared  on  the 
certificate  to  be  preferred  and  the  balance  common  stock.  The 
preferred  stock  gives  the  holder  rights  and  privileges  not  enjoyed 
by  the  holders  of  the  common  stock.  These  rights  usually 
include  a  prior  claim  for  dividends.  Six  per  cent  preferred 
Stock  would  entitle  the  holder  to  an  annual  dividend  of  6  per 


I 
I 


MEMBERSHIP  JN  A   CORPORATION  259 

cent  before  any  dividend  could  be  declared  on  the  common 
stock.  Upon  dissolution  the  preferred  stock  is  generally  paid 
before  the  common. 

Transfer  of  Stock.  —  Shares  of  stock  are  transferred  from  one 
holder  to  another  by  an  assignment  which  is  usually  upon  the 
back  of  the  certificate  of  stock  and  in  a  form  somewhat  Hke  the 
following :  — 

For  value  received  I  hereby  sell,  assign,  and  transfer  unto 
James  D.  Scott  twenty  shares  of  the  capital  stock  represented 
by  the  within  certificate,  and  do  hereby  irrevocably  constitute 
and  appoint  William  A.  WilHs  my  attorney  to  transfer  the  said 
stock  on  the  books  of  the  within  named  corporation,  with  full 
power  of  substitution  in  the  premises. 

Dated  November  10,  1903.  George  W.  Ellis. 

In  the  presence  of 

E.  A,  Wagner. 

The  attorney  named  to  transfer  the  stock  is  generally  the 
secretary  of  the  company. 

Stock  in  a  corporation  is  subject  to  sale  and  transfer  like  any 
other  kind  of  personal  property.  The  transferee  of  the  stock 
acquires  all  of  the  rights  and  assumes  all  of  the  habilities  arising 
after  the  date  of  the  transfer.  He  is  entitled  to  the  dividends 
declared  after  the  transfer  and  has  a  right  to  vote  at  the  stock- 
holder's meeting  and  exercise  all  other  rights  arising  from  his 
ownership. 

In  March  v.  Eastern  Railroad  Co.,  43  N.H.  515,  it  was  held  that  the 
purchaser  of  a  share  of  stock  in  a  corporation  takes  the  share  with  all  its  inci- 
dents, one  of  which  is  the  receiving  of  all  future  dividends  declared  on  such 
shares,  and  it  does  not  make  any  difference  at  what  time  or  from  what  sources 
the  profits  thus  divided  may  have  accrued. 

When  the  statute  imposes  a  personal  liability  upon  the  stock- 
holders, the  transferee  is  liable  under  such  statute  if  the  liability 
arises  after  the  transfer.  The  transfer  of  stock  must  be  recorded 
in  the  books  of  the  company  and  a  new  certificate  issued  before 
the  transferee  appears  as  a  stockholder  on  the  books  and  has  the 
right  to  vote  at  the  corporate  meetings. 


260  CORPORATIONS 


5.     MANAGEMENT  OF  CORPORATIONS 

Vote  of  Stockholders.  —  As  a  general  rule,  each  stockholder 
in  a  corporation  is  bound  by  all  acts  adopted  by  a  vote  of  a 
majority  of  the  stockholders  of  the  corporation,  provided  such 
acts  are  within  the  scope  of  the  powets  and  authority  conferred 
by  the  charter. 

In  Dudley  v.  Kentucky  High  School,  72  Ky.  576,  a  coqjoration  was  author- 
ized to  receive  and  hold  for  the  benefit  of  a  high  school  any  land  by  gift,  devise, 
or  purchase.  A  stockholder  brought  action  to  restrain  the  corporation  from 
purchasing  certain  real  estate,  claiming  that  it  could  not  afford  it  and  the  result 
would  be  the  bankruptcy  of  the  corporation.  Held,  that  the  action  could  not 
be  maintainfed,  as  the  majority  of  the  stockholders  had  voted  for  the  purchase. 
Every  stockholder  contracts  that  the  will  of  the  majority  shall  govern  in  all 
matters  coming  within  the  limits  of  the  act  of  incorporation. 

But  the  majority  can  not  bind  the  minority  by  any  acts  outside 
of  the  powers  conferred  by  the  charter. 

In  Barton  v.  Enterprise  Loan  Association,  114  Ind.  226,  it  was  provided  in 
the  articles  of  association  of  the  company  that  it  shall  continue  in  operation 
eight  years,  unless  it  shall  sooner  have  sufficient  funds  to  pay  its  debts  and  re- 
deem its  stock.  A  resolution  was  passed  by  a  majority  of  the  stockholders 
dissolving  the  association  before  the  time  limit,  and  it  was  held  that  without 
the  consent  of  all  the  stockholders  and  with  unredeemed  stock  outstanding, 
such  a  resolution  is  of  no  effect. 

In  some  cases,  the  management  of  the  corporation  is  vested 
in  the  directors,  and  then  the  authority  vested  in  the  stockhold- 
ers is  the  election  of  the  directors.  The  directors  alone  are 
authorized  to  act  in  the  management  of  the  business.  The  right 
to  make  by-laws  is  generally  in  the  majority  of  the  stockholders, 
although  in  some  cases  that  power  is  by  charter  vested  in  the 
directors. 

Notice  of  Meeting.  —  Notice  of  the  time  and  place  of  the 
stockholders'  meeting  must  be  given  to  each  stockholder  unless 
it  is  definitely  designated  by  the  charter  or  by-laws.  Each 
stockholder  is  usually  entitled  to  one  vote  for  each  share  of 
stock  owned  by  him,  although  at  common  law  each  stockholder 
had  but  one  vote  without  regard  to  the  number  of  shares  of 


RIGHTS  OF  CREDITORS  OF  CORPORATIONS  26 1 

Stock  he  owned.  At  common  law  the  right  to  vote  could  be  ex- 
ercised only  in  person,  but  now  the  right  to  vote  by  proxy  (that 
is  by  power  of  attorney)  is  generally  conferred  by  statute.  The 
proxy  or  authority  to  vote  is  in  the  form  of  a  written  power 
of  attorney,  and  is  revocable  at  the  pleasure  of  the  person 
executing  it. 

Directors.  —  As  stated  above,  the  active  management  of  the 
corporate  business  is  usually  vested  in  a  board  of  directors 
selected  by  a  majority  of  the  stockholders.  The  directors  act 
by  a  majority  vote.  The  powers  and  duties  of  the  directors  and 
other  officers  are  generally  fully  defined  in  the  by-laws. 

6.    RIGHTS  OF  CREDITORS  OF  CORPORATIONS 

In  General.  —  The  creditors  of  a  corporation  generally  have 
the  same  rights  and  remedies  against  the  corporation  and  its  prop- 
erty that  they  would  have  against  a  natural  person.  They  may 
obtain  a  judgment  against  it  and  issue  an  execution  against  its 
property,  or  adopt  the  other  remedies  that  they  would  have 
against  an  individual.  Aside  from  the  rights  of  creditors  to 
proceed  against  the  property  belonging  to  the  corporation,  there 
are  cases  in  which  the  creditor  may  also  look  to  the  stockholder, 
notwithstanding  the  general  rule  that  a  stockholder  is  not  indi- 
vidually liable  for  the  debts  of  the  corporation. 

Liability  of  Stockholders.  — The  first  of  these  cases  is  where 
the  stockholder  is  indebted  to  the  corporation  on  his  stock,  and 
the  payment  of  the  amount  is  necessary  to  pay  the  creditors.  It 
is  held  that  a  stockholder  must  contribute  the  full  amount  of  his 
subscription  for  stock  if  the  amount  is  needed  by  the  creditors. 
This  amount  is  a  part  of  the  capital  stock  of  the  company,  and 
the  capital  is  held  by  the  courts  to  be  in  the  nature  of  a  trust 
fund  for  the  payment  of  the  corporate  debts. 

In  Payne  v.  Bullard,  23  Miss.  88,  it  was  held  that  where  a  person  subscribes 
for  a  certain  number  of  shares  of  bank  stock  and  does  everything  necessary  in 
order  to  secure  his  right  to  the  stock,  but  does  not  fully  pay  for  it,  he  can  not 
afterwards  by  an  agreement  with  the  bank  diminish  the  number  of  his  shares 
so  as  to  affect  the  creditors  of  the  bank.  Stock  subscribed  to  a  bank  is  in  the 
nature  of  a  trust  fund  for  the  payment  of  its  liabilities. 


262  CORPORATIONS 

Hatch  V.  Dana,  loi  U.S.  205,  held,  that  creditors  of  a  corporation  who  have 
exhausted  their  remedy  against  the  corporation  can,  in  order  to  satisfy  their 
judgme'it,  proceed  against  a  stockholder  to  enforce  his  liability  to  the  company 
for  the  amount  remaining  due  upon  his  subscription  for  stock. 

The  stockholder  is  also  liable  to  the  creditors  of  the  corpora- 
tion if  any  part  of  the  capital  stock  has  been  unlawfully 
distributed  or  paid  out  to  him,  either  directly  or  indirectly, 
leaving  creditors  unpaid.  This  may  be  accomplished  by  dis- 
tributing funds  as  dividends  when  there  are  no  surplus  profits, 
or  in  other  ways,  but  however  accomplished,  the  stockholder 
may  be  compelled  to  refund  for  the  benefiit  of  the  creditors  the 
amount  so  received. 

In  Bartlett  v.  Drew,  57  N.Y.  587,  defendant  was  a  stockholder  in  the  New 
Jersey  Steam  Navigation  Co.  Three  boats  of  the  company  were  sold  for  a 
gross  sum  of  $15,000,  which  amount  was  divided  among  the  stockholders. 
This  action  was  brought  by  a  creditor  of  the  company  to  reach  the  amount  so 
received  by  defendant.  Held,  that  plaintiff  could  maintain  an  action  to  reach 
whatever  defendant  had  so  received.  It  is  immaterial  whether  he  got  it  by 
fair  agreement  or  by  a  wrongful  act,  the  creditors  have  a  right  to  be  paid  first 
out  of  the  assets  of  the  company. 

The  statutes,  which  in  some  of  the  states  have  imposed  addi- 
tional liabiHties  upon  the  stockholders,  vary  greatly.  Some  make 
the  stockholder  liable  for  all  debts  until  the  whole  capital  stock 
is  paid  in.  Others  make  him  liable  for  a  sum  equal  to  the 
amount  of  stock  held  by  him  in  addition  to  the  amount  yet  due 
on  his  stock,  and  so  on,  many  different  provisions  being  found 
in  the  different  states. 

McDonnell  v.  Alabama  Gold  Life  Insurance  Co.,  85  Ala.  401,  held,  that  by 
statute  in  that  state  a  stockholder  in  a  life  insurance  company  was  liable  for 
the  debts  of  the  company,  not  only  for  the  amount  of  his  unpaid  subscription 
for  stock,  but  also  for  an  additional  sum  equal  to  the  amount  of  his  stock. 

QUESTIONS   ON   CORPORATIONS 

1.  Define  corporation. 

2.  The  New  York  Supply  Co.  was  a  corporation  which  owned  a  piece 
of  real  property  that  was  sold  by  the  officers  of  the  corporation,  the  deed 
being  signed  personally  by  all  of  the  stockholders  in  their  individual  names. 
Was  the  conveyance  good? 

3.  Webster  owes   the    Standard  Novelty  Works,   a   corporation,   $500. 


CORPORATIONS  263 

Three  persons  own  all  the  stock  of  the  corporation.     They  in  their  individual 
names  sue  Webster  for  the  amount.     Can  they  succeed? 

4.  Distinguish  between  public  and  private  corporations.     Give  an  illus- 
tration of  each. 

5.  Define  stock  corporations  ;  non-stock  corporations. 

6.  Name  the  five  powers  and  attributes  of  nearly  all  private  stock  corpo- 
rations. 

7.  What  is  meant  by  perpetual  or  continuous  succession? 

8.  Is  the  power  to  hold  real  estate  necessary  to  a  corporation's  existence? 
Is  the  power  to  use  a  seal  necessary  ? 

9.  When  is  the  right  to  make  by-laws  in  a  corporation  necessary?  Are 
they  commonly  employed? 

10.  In  what  two  different  ways  are  corporations  created  by  the  govern- 
ment?    Which  is  the  most  frequently  employed? 

11.  Has  a  corporation  any  powers  except  such  as  are  conferred  upon  it  by 
its  charter? 

12.  The  Georgia  Railroad  Co.  has  authority  by  its  charter  to  maintain 
a  railroad  between  the  towns  of  A  and  B.  It  buys  boats  and  seeks  to 
establish  a  boat  system  on  one  of  the  rivers  running  into  the  town  of  B.  Has 
it  that  authority? 

13.  What  powers  has  a  corporation  aside  from  those  expressly  granted? 

14.  The  American  Dry  Goods  Co.  is  incorporated  for  the  purpose  of 
buying  and  selling  dry  goods.  In  the  course  of  its  business  the  company 
borrows  $1000  and  gives  its  note  therefor.     Has  it  this  authority? 

15.  The  above-named  company  owns  a  store  and  land  where  it  conducts 
business.  It  places  a  mortgage  upon  this  property  for  the  purpose  of  raising 
$5000.     Has  it  the  right? 

16.  The  above  corporation  forms  a  partnership  with  one  Greene  in  an 
adjoining  town  for  the  purpose  of  conducting  a  branch  dry  goods  store.  Has 
the  company  the  authority? 

17.  What  would  the  act  of  the  company  in  the  above  case  be  termed? 

18.  In  question  14  one  of  the  clerks  of  the  company  is  guilty  of  fraud  in 
making  a  sale  to  a  customer.     Is  the  company  liable? 

19.  Name  four  ways  in  which  a  corporation  may  be  dissolved. 

20.  Can  the  stockholders  of  a  corporation  dissolve  it  by  mutual  consent? 

21.  Can  the  state  dissolve  a  corporation  without  the  consent  of  the  stock- 
holders?    If  so,  how? 

22.  The  Southern  Tobacco  Co.,  a  corporation,  entered  into  a  combina- 
tion with  twenty  other  manufacturers  of  tobacco  for  the  purpose  of  forming 
a  tobacco  trust  and  combining  all  of  their  business  under  one  management. 
An  action  is  brought  to  dissolve  the  Southern  Tobacco  Co.     Can  it  be  done? 

23.  How  is  membership  in  a  corporation  acquired  ? 

24.  Is  the  possession  of  a  certificate  of  stock  necessary  to  membership  in  a 
corporation  ? 


264  CORPORATIONS 

25.  A  is  a  stockholder  in  a  corporation.  He  learns  that  the  profits  for  the 
past  year  have  been  about  10  per  cent  on  the  amount  of  capital  stock,  but  no 
dividends  have  been  declared.  He  therefore  sues  the  corporation  for  an 
amount  equal  to  10  per  cent  on  his  stock.  Can  he  recover?  If  not,  what 
remedy  has  he  against  the  corporation  ? 

26.  In  the  above  case  suppose  A  sells  his  stock  to  B  on  January  i,  and 
stipulates  that  all  profits  upon  said  stock  up  to  that  time  shall  belong  to  A. 
On  July  I  an  annual  dividend  of  10  per  cent  is  declared.  A  claims  one  half 
of  it;  can  he  recover? 

27.  What  is  preferred  stock? 

28.  How  are  shares  of  stock  transferred? 

29.  What  power  has  a  majority  of  the  stockholders  of  a  corporation? 

30.  How  is  the  stockholders'  meeting  called,  and  how  many  votes  has  each 
stockholder? 

31.  A,  B,  and  C  are  stockholders  in  the  Standard  Glass  Co.  Only  50 
per  cent  of  their  capital  stock  has  been  paid  in.  The  corporation  fails  and  the 
creditors  sue  A,  B,  and  C  personally  for  the  amount  of  their  stock  not  yet  paid. 
Can  they  recover? 

32.  If  in  the  above  case  after  the  corporation  was  practically  bankrupt  cer- 
tain of  the  assets  had  been  sold  and  the  proceeds  distributed  among  A,  B,  and 
C,  could  the  creditors  recover  this  amount  as  well  as  the  amount  unpaid  on 
their  stock? 


INSURANCE 

I.     IN   GENERAL 

Insurance  Companies.  —  Certain  events  or  catastrophies  may 
happen  which,  although  by  no  means  frequent  in  the  experience 
of  the  average  man,  are  of  so  much  importance  and  may  entail 
upon  him  such  severe  loss  that  he  seeks  a  mode  of  protection. 
The  impending  loss  may  be  the  destruction  of  one's  property 
by  fire,  flood,  or  cyclone ;  or  it  may  be  the  loss  of  one's  earning 
capacity,  by  accident  to  his  person ;  or  the  loss  to  his  family,  by 
reason  of  his  death. 

For  the  purpose  of  affording  protection  against  these  calami- 
ties there  exist  many  large  corporations  known  as  insurance 
companies,  which  engage  in  the  business  of  assuming  such  risks 
for  a  certain  compensation  known  as  a  premium.  These  pre- 
miums, although  comparatively  small,  being  contributed  by  the 
many,  form  a  large  fund,  out  of  which  the  losses  to  the  few  are 
indemnified. 

Definition.  —  Insurance  is  defined  as  a  contract  whereby  for  a 
stipulated  consideration  one  party  undertakes  to  compensate  the 
other  for  loss  on  a  particular  subject  for  a  specified  peril.  The 
party  agreeing  to  make  the  compensation  is  called  the  insurer, 
or  the  underwriter,  the  other  party  to  the  contract  being  the 
insured.  The  written  contract  is  called  the  policy,  and  the  event 
insured  against,  the  risk. 

Every  state  has  an  insurance  oflficial,  whose  duty  it  is  to  regu- 
late and  inspect  the  different  insurance  companies  doing  business 
in  his  state  and  to  see  that  they  are  solvent  and  that  their  affairs 
are  properly  conducted. 

2.     FIRE  INSURANCE 

Insurable  Interest.  —  The  insured  must  have  an  insurable 
interest  in  the  risk  or  property  insured.      This  means  that  he 

265 


266  INSURANCE 

must  have  an  interest  of  such  a  nature  that  the  fire  insured 
against  would  directly  injure  him.  If  the  person  had  no  interest 
in  the  property  upon  which  he  obtained  insurance,  the  only 
object  would  be  a  mere  speculation,  and  the  contract  would  not 
be  upheld  in  law. 

Riggs  V.  Insurance  Co.,  125  N.Y.  7,  was  a  case  in  which  a  stockholder  in  a 
steamship  company  had  one  of  the  boats  of  the  corporation  insured  in  his  fevor, 
and  the  question  was  whether  or  not  he  had  an  insurable  interest  in  the  prop- 
erty of  the  company  of  which  he  was  a  stockholder.  It  was  held  by  the  court 
that  he  had  such  an  interest.  The  stockholder  in  a  corporation  has  no  legal 
title  to  the  assets  of  the  corporation,  but  he  has  an  equitable  right  of  a  pecun- 
iary nature  which  may  be  prejudiced  by  the  destruction  of  the  property  belong- 
ing to  the  corporation,  as  a  loss  of  the  property  would  affect  the  dividends 
distributed  by  the  company  and  would  also  lessen  the  assets  which  would  be 
distributed  among  the  stockholders  upon  the  dissolution  of  the  company. 

This  interest  may  be  an  existing  interest ;  as,  for  example,  the 
absolute  ownership,  or  a  life  interest,  or  a  right  .by  mortgage  or 
lien.  Or  it  may  be  only  an  interest  in  expected  profits  or  goods, 
as  a  shipowner's  right  to  insure  goods  upon  which  he  has  a 
claim  for  freight. 

In  National  Filtering  Oil  Co.  v.  Citizens  Insurance  Co.,  106  N.Y.  535,  plain- 
tiff had  an  agreement  with  Ellis  &  Co.,  by  virtue  of  which  Ellis  &  Co.  were  to 
pay  plaintiff  royalties  for  the  use  of  plaintiff's  patents,  which  royalties  were 
guaranteed  to  amount  to  $250  per  month.  Plaintiff  insured  the  plant  of  Ellis 
&  Co.,  the  agreement  of  the  insurance  company  in  the  policy  being  that  in 
case  the  buildings  occupied  by  Ellis  &  Co.  should  be  damaged  by  fire,  so  as 
to  cause  a  diminution  in  said  royalties,  defendant  would  pay  the  amount  of  such 
diminution  during  the  repairs  of  said  premises.  Held,  that  plaintiff  had  an 
insurable  interest  in  this  property. 

The  owner  of  property  does  not  lose  his  insurable  interest  by 
mortgaging,  leasing,  or  giving  an  executory  contract  to  sell  it, 
as  more  than  one  person  can  have  an  insurable  interest  in  the 
property.  For  example,  A  owns  a  house  and  lot,  and  leases  it 
to  B,  mortgages  it  to  C,  and  gives  D  an  executory  contract  of 
sale.  Each  one  of  these  four  parties  has  an  insurable  interest  in 
the  house. 

Davis  V.  Insurance  Co.,  10  Allen  (Mass.)  113,  held,  that  the  omission  to 
State  in  an  application  for  insurance  on  a  building  that  a  written  agreement 


FIRE  INSURANCE  267 

had  been  given  by  the  applicant  to  convey  the  building  to  a  third  party  in 
consideration  of  a  certain  sum  of  money  being  paid  within  a  fixed  time,  does 
not  affect  the  right  to  recover  the  full  amount  of  insurance. 

Divided  Interest.  —  Each  person  having  an  insurable  interest 
in  the  house  could  not  recover  the  full  value  of  the  house  in  case 
of  fire,  but  merely  the  value  of  his  interest.  The  owner  can 
recover  the  market  value  at  the  time  of  the  loss,  and  the  mort- 
gagee can  recover  the  value  of  the  house  up  to  the  amount  of 
his  mortgage. 

In  Kernochan  v.  Insurance  Co.,  5  Duer  (N.Y.)  i,  it  was  held  that  the 
mortgagee's  insurable  interest  in  the  mortgaged  property  corresponded  in 
amount  to  the  debt  secured,  and,  in  the  event  of  total  loss,  he  can  recover 
the  whole  sum  insured,  provided  it  does  not  exceed  the  sum  due  upon  the 
mortgage.  This  recovery  can  not  be  defeated  by  showing  that  the  property, 
notwithstanding  the  loss,  is  still  ample  security  for  the  mortgaged  debt. 

Form  of  Contract.  —  The  contract  of  insurance  is  usually  in 
writing,  although  it  may  be  oral,  unless  expressly  required  by 
statute  to  be  written.  The  forms  adopted  by  the  various  com- 
panies are  much  alike  and  generally  set  forth  in  detail  all  of  the 
agreements  between  the  parties. 

This  contract  requires  a  meeting  of  the  minds  of  the  parties, 
and  certain  terms  must  be  definitely  settled  upon,  viz. :  The 
property  insured,  the  risk  insured  against,  the  rate  of  premium 
and  the  term  of  duration  of  the  insurance. 

In  Goddard  v.  Insurance  Co.,  108  Mass.  56,  defendant  insured  a  building 
as  a  machine  shop  against  fire.  The  representation  that  it  was  such  was  made 
by  an  insurance  broker  without  the  knowledge  or  consent  of  plaintiff".  It  was 
in  fact  used  as  an  organ  factory.  The  risk  on  an  organ  factory  was  greater 
than  it  would  have  been  on  a  machine  shop,  and  it  was  held  that  the  policy 
was  void,  as  the  minds  of  the  parties  never  met  on  the  subject-matter  of  the 
contract. 

Description. — The  policy  must  contain  a  description  of  the 
property  insured.  This  is  generally  set  forth  briefly  and  gives 
the  nature  of  the  building  or  article.  It  also  gives  the  title  or 
interest  of  the  insured  in  the  same,  that  is,  whether  he  is  the 
owner,  mortgagee,  bailee,  etc.  The  risk  insured  against  must 
also  be  agreed  upon.  The  property  may  be  insured  against  fire, 
flood,  tornado,  or  some  other  unforeseen  casualty. 


268  INSURANCE 

Oral  Contract.  —  The  contract  is  binding  and  in  force  as  soon 
as  the  agreement  is  completed,  although  the  written  policy  may 
not  have  been  actually  delivered,  nor  in  fact  ever  have  been 
issued. 

Fish  V.  Cottenet,  44  N.Y.  538,  held,  that  if  an  agreement  foi  .nsurance  is 
made  with  an  agent  authorized  to  bind  the  company,  but  through  the  negli- 
gence of  the  agent  the  application  is  not  received  in  time  to  be  acted  on  by 
the  company  before  the  loss  occurs,  the  company  is  liable. 

In  Ellis  V.  Insurance  Co.,  50  N.Y.  402,  plaintiff  applied  to  an  insurance  agent 
for  insurance  upon  a  quantity  of  cotton.  The  amount  and  the  premium  were 
settled  upon  and  the  agent  agreed  to  insure  as  requested.  It  was  left  with  the 
agent  to  select  the  companies  in  which  he  would  insure,  and  he  decided  to 
place  $6100  with  defendant,  entering  it  upon  his  books,  and  crediting  defendant 
with  the  amount  of  the  premium  which  was  forwarded  to  defendant  before  the 
loss.  Held,  that  this  constituted  a  contract  to  issue  a  policy  for  the  amount 
so  placed  and  was  binding  on  defendant. 

Effect  of  Fraud.  —  A  contract  of  insurance  is  one  requiring 
good  faith  between  the  parties,  and  the  party  seeking  insurance 
is  bound  to  disclose  any  circumstance  that  will  affect  the  risk. 
Any  fraudulent  dealing  is  fatal  to  the  rights  of  the  party 
responsible  for  it.  Any  concealment  of  a  material  fact  inquired 
into  by  the  insurer  will,  if  made  intentionally  by  the  insured, 
avoid  the  policy.  Still  neither  party  is  bound  to  volunteer  in- 
formation regarding  matters  of  which  the  other  has  knowledge 
or  of  which  in  the  exercise  of  ordinary  care  he  ought  to  have 
knowledge.  But  the  insured  must  not  withhold  information 
which  would  affect  the  judgment  of  the  insurer. 

In  Armenia  Insurance  Co.  v.  Paul,  91  Pa.  St.  520,  one  of  the  questions  in 
the  application  for  insurance  was,  "What  is  the  distance,  occupation,  and 
material  of  all  buildings  within  150  feet  ?  "  No  answer  was  made  to  this  ques- 
tion and  the  company  sought  to  avoid  the  policy  on  that  ground.  Held,  that 
they  might  have  refused  to  issue  the  policy  or  have  sought  further  information, 
but  that  by  issuing  it  they  waived  the  answer  to  this  question. 

Representation.  —  A  representation  in  connection  with  this 
subject  is  said  to  be  a  statement  of  fact  made  at  the  time  of,  or 
before  the  contract  relating  to,  the  proposed  adventure,  and  upon 
the  good  faith  of  which  the  contract  is  made.  A  material  mis- 
representation of  fact,  whether  innocent  or  fraudulent,  avoids 
the  contract. 


FIRE  INSURANCE  269 

In  Armour  v.  Insurance  Co.,  90  N.Y.  450,  defendant  issued  a  policy  of 
insurance  upon  plaintiffs  warehouse,  by  the  terms  of  which  losses  should  be 
apportioned  between  the  different  policies  on  the  building,  and  it  also  stated 
that  any  misrepresentation  whatever  would  avoid  the  policy.  Plaintiffs  agent, 
who  applied  for  the  policy,  stated  through  mistake  that  there  was  already 
$200,000  insurance  on  the  building,  when  there  was  in  fact  but  $30,000. 
Held,  that  the  misrepresentation  was  material,  and  the  plaintiff  could  not 
recover  on  the  policy. 

Warranty.  —  A  warranty  is  a  statement  of  fact  or  promise  of 
performance  relating  to  the  subject  of  insurance  or  to  the  risk, 
inserted  in  the  policy  itself  or  expressly  made  a  part  of  it,  which, 
if  not  literally  true  or  strictly  complied  with,  will  avoid  the  con- 
tract. It  differs  from  a  representation,  which,  as  we  have  seen, 
is  a  collateral  inducement  outside  of  the  contract  and  need  be 
only  substantially  complied  with,  whereas  the  warranty  must  be 
contained  in  the  policy  and  must  be  strictly  performed. 

In  Wood  V.  Insurance  Co.,  13  Conn.  533,  it  was  held  that  any  statement 
or  description  on  the  part  of  the  insured  on  the  face  of  the  policy  which 
relates  to  the  risk  is  an  express  warranty,  and  such  a  warranty  must  be  strictly 
complied  with  or  the  insurance  is  void. 

If  questions  in  the  application  are  not  answered  or  if  the 
answers  are  incomplete  but  not  false,  there  is  no  breach  of 
warranty,  provided  the  insurer  accepts  the  application  without 
objection. 

Although  the  breach  of  warranty  or  misrepresentation  of  a 
material  fact  may  not  contribute  to  or  cause  the  loss,  neverthe- 
less the  policy  is  avoided,  for  the  risk  is  different  from  that 
which  the  insurer  undertook  to  assume. 

In  Ripley  v.  JEtna  Insurance  Co.,  30  N.Y.  136,  at  the  time  the  insurance 
was  obtained  the  question  was  asked  whether  there  was  a  watchman  in  the 
buildings  during  the  night.  The  insured  answered,  "  There  is  a  watchman 
nights."  It  appeared  that  by  the  custom  at  the  mill  no  watchman  was  kept 
from  12  o'clock  Saturday  night  until  12  o'clock  Sunday  night.  The  above 
answer  was  referred  to  and  made  a  part  of  the  policy.  Held,  that  the  answer 
was  to  be  understood  to  mean  that  there  was  a  watchman  at  the  mill  every 
night,  and  a  failure  to  keep  a  watchman  every  night  constituted  a  breach  of 
the  warranty  and  avoided  the  policy,  without  regard  to  whether  it  had  any- 
thing to  do  with  producing  the  loss. 


270  INSURANCE 

3.     FIRE   INSURANCE   POLICY 

Uniformity.  —  Statutes  have  been  passed  in  New  York  and  in 
several  other  states  adopting  a  standard  form  of  fire  insurance 
policy,  the  object  being  to  establish  a  uniformity  of  contract 
and  to  avoid  conflict  between  different  companies  insuring  the 
same  property. 

Loss  by  Fire.  —  Insurance  in  the  policy  against  loss  by  fire 
includes  loss  which  is  caused  by  the  burning  of  the  property 
insured  or  which  is  the  result  of  fire  in  close  proximity,  the  heat 
from  which  damages  the  property  insured.  It  also  includes  the 
loss  or  damage  by  the  water  from  the  fire  engines  or  from  the 
exposure  or  theft  of  the  goods  during  their  removal  to  a  place 
of  safety  at  the  time  of  a  fire. 

White  V.  Insurance  Co.,  57  Me.  91,  was  a  case  in  which  it  was  held  that 
the  damage  and  expense  caused  by  removing,  with  a  reasonable  degree  of 
care  suited  to  the  occasion,  insured  goods  from  apparent  immediate  destruc- 
tion by  fire,  are  covered  by  a  policy  insuring  the  goods  against  "loss  and 
damage  by  fire,"  although  the  building  in  which  they  were  insured  and  from 
which  they  were  removed  was  not,  in  fact,  burned. 

It  does  not  include  loss  by  fire  caused  by  lightning  unless  a 
lightning  clause  is  inserted ;  therefore,  it  is  customary  to  include 
such  a  clause. 

In  Babcock  v.  Montgomery  Insurance  Co.,  6  Barb.  (N.Y.)  637,  it  was  held 
that  under  a  policy  of  insurance  against  loss  or  damage  by  fire,  one  of  the  con- 
ditions being  that  the  insurer  will  be  liable  for  "  fire  by  lightning,"  the  com- 
pany is  not  liable  for  the  destruction  of  the  building  by  its  being  shattered 
and  torn  by  lightning  without  its  being  burned.  Unless  the  loss  is  the  effect 
of  actual  ignition,  the  insurers  are  not  liable. 

If  the  fire  is  caused  by  the  act  of  an  incendiary,  or  by  the  acts 
of  the  insured  while  insane,  or  by  the  careless  acts  of  a  third 
person,  the  insurance  company  is  liable. 

Location.  —  The  standard  policy  contains  a  statement  of  the 
location  of  the  property  insured,  and  if  it  is  removed  to  another 
or  different  place  without  the  consent  of  the  insurer,  the  policy 
is  no  longer  in  effect.  So  if  a  party  insures  his  household  fur- 
niture while  living  on  a  certain  street,  and  then  moves  to  an- 


FIRE  INSURANCE  POLICY 


271 


other  street,  the  insurance  ceases  to  be  in  force.  The  reason 
for  this  rule  is  plain,  for  the  risk  is  hkely  to  vary  in  different 
locations,  and  whether  it  does  or  not,  the  insurer  has  the 
right  to  know  what  risk  he  is  assuming,  as  he  may  wish  to 
decline  placing  any  more  insurance  on  property  in  the  same 
building. 

In  Lyons  v.  Insurance  Co.,  14  R.I.  109,  a  policy  of  insurance  against  fire 
was  issued  on  furniture  described  as  contained  in  a  house  on  McMillen  Street, 
Providence,  R.  I.  The  insured,  without  the  knowledge  of  the  insurer,  moved 
the  articles  to  a  house  on  another  street,  in  which  they  were  burned.  Held, 
that  the  insured  could  not  recover.  The  statement  of  the  location  of  the 
goods  is  a  continuing  warranty. 

Bradbury  v.  Insurance  Co.,  80  Me.  396,  was  a  case  in  which  plaintiff  had  a 
fire  insurance  policy  on  a  "  frame  stable  building,"  specifically  described,  and 
on  his  "  carriages,  sleighs,  hacks,  horses,  harnesses,  blankets,  robes,  and 
whips  contained  therein."  It  was  held  that  this  insurance  does  not  cover 
damage  by  fire  to  the  plaintifTs  hack  while  in  a  repair  shop  one  eighth  of  a 
mile  away  and  on  another  street,  without  the  knowledge  and  consent  of  the 
insurer,  for  the  temporary  purpose  of  being  repaired. 

Amount  Recoverable.  —  The  market  or  cash  value  of  the  prop- 
erty at  the  time  of  the  fire  is  the  amount  that  can  be  recovered 
of  the  insurance  company  if  this  sum  does  not  exceed  the  amount 
of  the  policy.  If  the  property  is  only  partially  destroyed,  the 
amount  that  may  be  recovered  is  the  difference  in  the  value  of 
the  property  before  and  after  the  fire.  The  insurer  generally 
reserves  the  right  to  rebuild  or  repair,  and  in  case  he  elects  so 
to  do,  this  takes  the  place  of  money  damages. 

Additional  Insurance.  —  The  standard  policy  of  insurance  con- 
tains a  clause  which  provides  that  the  policy  shall  be  void  in 
case  the  insured  now  has,  or  shall  hereafter  make  or  procure, 
any  other  contract  of  insurance,  whether  valid  or  not,  on  prop- 
erty covered  in  whole  or  in  part  by  this  policy,  without  an 
agreement  indorsed  or  added  thereon,  allowing  such  additional 
insurance.  The  reason  for  this  provision  is  that  the  companies 
do  not  wish  to  have  the  property  insured  for  more  than  its  value, 
and  they  also  desire  to  know  whether  any  other  insurance  is 
carried  on  the  property,  as  in  case  of  loss,  if  insured  in  several 
companies,  each  need  contribute  only  its  proportionate  share. 


272  INSURANCE 

Sanders  v.  Cooper,  115  N.Y.  279,  held,  that  where  one  of  the  conditions  of 
a  policy  declares  it  void  in  case  of  other  insurance  on  the  property  insured,  not 
indorsed  on  the  policy  or  consented  to  in  writing  by  the  insurer,  the  fact  that 
there  was  such  other  insurance  outstanding,  the  existence  of  which  was  not 
communicated  or  known  to  the  company,  is  a  breach  of  a  condition  of  the 
policy  that  renders  it  void. 

Alienation  Clause.  —  The  standard  policy  also  contains  a  clause 
known  as  the  alienation  clause,  which  renders  the  policy  void  if 
any  change  other  than  the  death  of  the  insured  takes  place  in  the 
interest,  title,  or  possession  of  the  subject  insured  (except  change 
of  occupants  without  increase  of  hazard),  whether  by  legal  process 
or  judgment,  or  by  the  voluntary  act  of  the  insured.  This  sec- 
tion means  any  parting  with  or  sale  of  the  premises,  and  does 
not  include  the  giving  of  a  mortgage  upon  the  insured  premises. 

Judge  V.  Insurance  Co.,  132  Mass.  521,  was  a  case  in  which  the  insurance 
policy  contained  practically  the  above  clause.  After  the  policy  was  issued, 
the  insured  gave  a  mortgage  on  the  property  covered  by  the  policy,  but  the 
mortgagee  had  made  no  move  to  foreclose,  in  fact  the  mortgage  was  not  yet 
due.     Held,  that  the  policy  was  not  avoided. 

Assignment.  —  A  fire  insurance  policy  is  not  assignable,  and 
if  assigned  without  the  consent  of  the  insurer  it  is  void. 

In  Lett  V.  Insurance  Co.,  125  N.Y.  82,  defendant  issued  a  policy  of  insur- 
ance on  property  owned  by  B,  the  loss  being  payable  to  A  as  mortgagee.  B 
afterwards  conveyed  the  property  to  C,  who  in  turn  conveyed  it  to  plaintiff. 
At  the  time  of  the  last  conveyance,  B  executed  to  plaintiff  an  assignment  of 
his  interest  in  the  policy,  but  the  consent  of  defendant  was  not  indorsed  on  the 
policy,  although  such  an  indorsement  was  a  condition  of  its  remaining  in  force. 
Held,  that  the  policy  was  invalid  because  of  the  failure  to  obtain  defendant's 
consent  to  the  assignment. 

If  with  the  consent  of  the  company  the  property  insured  as 
well  as  the  policy  is  assigned,  a  new  contract  is  formed  which 
will  not  be  affected  by  any  act  of  the  assignor. 

Unoccupied  Dwelling.  —  The  standard  form  of  policy  also 
provides  that  if  the  property  is  a  dwelling  and  remains  vacant 
or  unoccupied  without  the  consent  of  the  company  for  the 
period  of  10  days  the  insurance  is  of  no  effect.  This  clause  is 
held  to  be  a  reasonable  restriction,  as  the  insurer  is  entitled  to 


FIRE  INSURANCE  POUCY 


273 


know  that  the  premises  are  receiving  ordinary  supervision.     It 
means  that  the  dwelling  must  have  a  tenant  living  in  it. 

In  Corrigan  v.  Insurance  Co.,  122  Mass.  298,  the  insurance  policy  provided 
that  it  should  be  void  if  the  house  insured  should  remain  vacant  or  unoccupied 
for  the  space  of  10  days  without  written  notice  to,  and  consent  of,  the  com- 
pany. Held,  that  if  the  house  had  not  been  used  by  some  one  as  a  dwelling 
place  within  10  days  of  the  date  of  the  loss  the  policy  would  be  void,  the  con- 
sent of  the  company  not  having  been  obtained.  If  the  former  tenant  had 
moved  his  family  into  another  house  in  which  they  slept  and  took  their  meals, 
the  fact  that  he  still  retained  the  key  and  that  some  of  the  furniture  was  still 
in  the  house  did  not  constitute  an  occupancy  of  the  premises. 

Factory  Buildings.  —  There  is  a  further  provision  rendering 
the  poUcy  void  if  the  subject  insured  is  a  factory  building  and 
is  operated  after  10  o'clock  at  night  or  some  other  given  hour, 
or  is  not  operated  for  10  consecutive  days  or  some  other  specific 
length  of  time. 

In  the  case  oiDay  v.  Insurance  Co.,  70  Iowa  710,  the  policy  of  insurance  on 
a  flour  mill  contained  the  provision  that  if  the  mill  were  shut  down  or 
lemained  idle  from  any  cause  whatever  for  more  than  20  days  without  no- 
tice to  the  company,  the  policy  would  be  suspended  from  the  expiration  of 
that  time  until  the  mill  resumed  work.  Held,  that  the  stoppage  of  the  mill 
for  more  than  20  days  without  the  required  notice  suspended  the  policy, 
though  the  mill  was  stopped  for  necessary  repairs  to  the  mill  or  race. 

Renewals.  —  The  policy  is  often  renewed  by  a  short  form  of 
receipt  which  obviates  the  necessity  of  a  new  policy.  This 
renewal,  which  may  be  either  in  writing  or  by  parol,  in  sub- 
stance creates  a  new  contract  on  the  same  terms  and  conditions 
as  those  agreed  upon  in  the  old  policy. 

Hay  V.  Insurance  Co.,  77  N.Y.  235,  held,  that  an  agreement  to  renew  a 
policy  of  fire  insurance  in  the  absence  of  evidence  that  any  change  was 
intended  implies  that  the  terms  of  the  existing  policy  are  to  be  continued. 

Cancellation.  —  The  standard  form  of  policy  contains  a  stipu- 
lation that  the  policy  may  be  canceled  at  any  time  by  the 
company,  or  at  the  request  of  the  insured  upon  giving  five  days' 
notice  of  such  cancellation.  And  in  case  of  such  cancellation 
the  unearned  premiums  paid  shall  be  returned  to  the  insured. 

Mortgaged  Property.  —  When  the  property  insured  is  mort- 
gaged and  it  is  desired  that  in  case  of  fire  the  insurance  shall  be 

COM.  LAW  — 18 


274  INSURANCE 

paid  to  the  mortgagee  to  satisfy  his  claim,  it  is  the  custom  to 
attach  a  mortgage  clause  which  provides  that  the  insurance  shall 
be  paid  to  the  mortgagee  named  as  his  interest  may  appear. 

Notice  of  Loss.  —  After  a  loss  it  is  the  duty  of  the  insured  to 
give  immediate  notice  to  the  company.  Under  the  standard 
form  of  policy  this  notice  must  be  in  writing.  The  damaged 
goods  must  be  inventoried,  and  a  proof  of  loss  duly  sworn  to 
must  be  filed  within  sixty  days. 

Knickerbocker  Insurance  Co.  v.  McGinnts,  87  111.  70,  was  a  case  in  which 
a  policy  of  fire  insurance  required  immediate  notice  to  be  given  by  the  assured 
in  case  of  a  loss,  and  in  the  great  Chicago  fire  on  October  9,  1871,  plaintiff's 
property  was  burned,  notice  of  the  loss  being  given  November  13,  1871.  It 
was  held  to  have  been  given  in  sufficient  time  in  view  of  the  great  derangement 
of  all  kinds  of  business  caused  by  the  fire. 

Unless  the  notice  is  given  as  stated  and  the  proof  of  loss  filed 
within  the  specified  time,  no  recovery  can  be  had  on  the  policy. 

Pro  Rata  Clause.  —  The  standard  policy  contains  a  pro  rata 
clause,  under  which  the  insured  can  not  recover  more  than  the 
amount  of  his  loss  in  the  property  insured,  where  there  is  more 
than  one  policy  on  the  same  property.  Thus  a  man  may  have 
his  house  insured  in  three  companies,  as  follows  :  in  number  one 
for  1^4000,  in  number  two  for  $6000,  and  in  number  three  for 
1^2000.  The  house  is  damaged  by  fire  to  the  amount  of  $6000. 
The  insured  can  recover  only  this  amount,  and  the  companies 
will  be  compelled  to  pay  their  pro  rata  portions ;  that  is,  num- 
ber one  will  be  required  to  pay  ;^2000,  number  two  i^3000,  and 
number  three  $1000.  This  rule  does  not  apply  to  the  case  of 
several  persons  with  different  interests  in  the  same  property, 
but  to  the  case  of  any  insurer  who,  if  he  recovered  the  full 
amount  on  all  policies,  would  be  getting  double  insurance  upon 
the  loss. 

4.    LIFE   INSURANCE 

Definitions.  —  Another  form  of  insurance  becoming  more 
general  every  year  is  life  insurance.  This  kind  of  contracc 
appears  in  an  almost  endless  number  of  foVms.  It  is  in  its 
simplest  form  an  agreement  upon  the  part  of  the  insurer  to  pay 


UFE  INSURANCE  2/5 

a  specific  sum  of  money  upon  the  death  of  a  certain  person, 
called  the  insured,  to  a  specific  person  called  the  beneficiary. 
The  consideration  paid  by  the  insured  is  called  the  premium, 
and  is  generally  a  certain  amount  payable  annually  or  monthly. 
The  agreement  may  take  the  form  of  what  is  termed  an  endow- 
ment insurance,  whereby  the  insured,  after  paying  the  premium 
for  a  given  number  of  years,  will  receive  a  certain  sum  of 
money,  or  if  he  dies  before  the  expiration  of  the  period,  the 
amount  of  the  policy  will  go  to  the  beneficiary.  The  benefici- 
ary, instead  of  being  a  specific  person,  may  be  the  estate  of  the 
insured. 

Insurable  Interest.  —  In  life  insurance,  as  well  as  in  other 
classes  of  insurance,  the  applicant  for  the  policy  must  have  an 
insurable  interest  in  the  life  of  the  insured,  otherwise  the  insur- 
ance would  be'  a  mere  speculation  upon  the  life  or  death  of  the 
person  insured,  placing  a  premium  upon  his  death  in  favor  of 
one  who  had  no  other  interest  in  him.  Every  person  has  an 
insurable  interest  in  his  own  life  and  also  in  the  life  of  any 
person  upon  whom  he  depends  either  wholly  or  in  part  for  ed- 
ucation or  support,  and  in  the  life  of  any  person  who  is  under 
a  legal  obligation  to  him  for  the  payment  of  money.  In  short,  a 
person  may  be  said  to  have  an  insurable  interest  in  the  life  of 
any  one  whose  death  would  naturally  cause  him  a  pecuniary  loss 
or  disadvantage. 

In  Bevin  v.  Life  Insurance  Co.,  23  Conn.  244,  plaintiff  advanced  to  Bar- 
stow  $300  and  some  articles  of  personal  property,  under  an  agreement  that 
Barstow  should  go  to  California  and  labor  there  for  at  least  one  year,  and  then 
account  to  plaintiff  for  one  half  the  profits.  Plaintiff  then  insured  Barstow's 
life  with  defendant  for  $1000.  Held,  that  plaintiff  had  an  insurable  interest  in 
Barstow's  life  and  could  recover  the  amount  of  the  policy. 

A  partner  has  an  insurable  interest  in  the  life  of  his  copartner, 
and  a  creditor  of  the  partnership  in  the  life  of  each  partner. 

In  the  case  of  Connectiait  Mutual  Life  Insurance  Co.  v.  Litchs,  108  U.S. 
498,  A  and  B  formed  a  partnership  with  a  capital  of  $10,000,  in  which  each 
was  to  contribute  one  half.  A  temporarily  contributed  B's  half,  and  after  B's 
failure  to  comply  with  his  agreement  he  had  B's  life  insured  for  $5000.  Held, 
that  A  had  an  insurable  Interest  in  B's  life  to  the  amount  which  B  should 
have  contributed  to  the  firm. 


2/6  INSURANCE 

MorreU  v.  Life  Insurance  Co.y  lo  Cush.  (Mass.)  282,  held,  that  a  creditor 
of  a  firm  has  an  insurable  interest  in  the  life  of  one  of  the  partners  thereof, 
although  the  other  partner  may  be  entirely  able  to  pay  the  debt,  and  although 
the  estate  of  the  insured  is  perfectly  solvent. 

A  woman  has  an  insurable  interest  in  the  life  of  a  prospective 
husband  as  well  as  an  insurable  interest  in  a  husband's  life,  and 
a  man  has  the  same  interest  in  the  life  of  his  wife.  Mere  rela- 
tionship is  not  enough  to  give  an  insurable  interest.  There 
must  be  an  element  of  dependency  coupled  with  the  relationship. 
A  nephew  has  no  insurable  interest  in  the  life  of  his  uncle  nor 
has  one  brother  in  the  life  of  another. 

Lewis  V.  Insurance  Co.,  39  Conn.  100,  held,  that  one  brother  did  not,  from 
the  mere  relationship,  have  an  insurable  interest  in  the  lite  of  another  brother. 

If  the  person  taking  out  the  policy  has  an  insurable  interest 
to  support  the  policy  at  the  time  it  is  obtained,  he  may  make 
it  payable  to  any  one,  and  it  is  generally  held  that  he  may  sub- 
sequently assign  it  to  any  one  whether  such  beneficiary  or  trans- 
feree has  an  insurable  interest  or  not,  unless  it  is  apparent  that 
the  transaction  is  a  mere  cover  for  a  wagering  contract. 

St.  John  V.  Life  Insurance  Co.,  13  N.Y.  31,  held,  that  a  policy  of  life  insur- 
ance is  assignable  and  the  assignee  for  value  of  such  a  policy  is  entitled,  on 
the  death  of  the  party  whose  life  is  insured,  to  recover  the  full  amount  of  the 
policy  without  reference  to  the  amount  of  consideration  paid  by  him  for  the 
assignment. 

If  the  person  taking  out  the  insurance  had  an  insurable 
interest  at  the  time,  the  fact  that  the  interest  ceases  does  not 
affect  the  policy.  Therefore  if  a  man  insures  the  life  of  his 
debtor  and  the  debtor  subsequently  pays  the  debt,  the  policy 
may  still  be  continued  and  enforced  at  the  death  of  the  party 
insured. 

In  the  case  in  which  the  insured  designates  another  person  as 
beneficiary  the  right  of  such  beneficiary  as  a  general  rule' 
becomes  vested  at  once  and  it  can  not  be  disturbed  by  assign- 
ment or  in  any  other  way  without  the  consent  of  such  bene- 
ficiary, unless  the  right  to  make  a  new  appointment  is  reserved 
in  the  policy  itself. 


\ 


LIFE  INSURANCE 


277 


In  the  case  of  Glanz  v.  Gloeckler,  104  111.  573,  it  was  held  that  when  a 
father  takes  out  a  policy  of  insurance  upon  his  own  life  in  favor  of  an  infant 
daughter,  paying  all  of  the  premiums  himself  and  retaining  the  policy,  the  con- 
tract is  between  the  insurance  company  and  the  daughter,  and  upon  the  father's 
death  the  legal  title  to  the  policy  vests  in  her  and  she  is  entitled  to  the  pos- 
session of  it. 

Premiums.  —  The  premiums  on  life  insurance  are  graded 
according  to  the  age  of  the  risk.  The  person  insured  must 
undergo  a  physical  examination,  as  only  healthy  persons  are 
insured.  The  amounts  of  the  premiums  are  determined  by 
average  results  computed  upon  the  length  of  life  of  a  large 
number  of  persons  carefully  arranged  and  tabulated.  These 
results  so  arranged  are  called  "mortuary  tables." 

Effect  of  Concealment.  —  The  contract  of  life  insurance  like 
that  of  fire  insurance  requires  the  exercise  of  good  faith  between 
the  parties,  but  to  avoid  the  policy  the  concealment  of  a  material 
fact  not  made  the  subject  of  an  express  inquiry  must  be  inten- 
tional. 

In  Mallory  v.  Travelers  Insurance  Co.,  47  N.Y.  52,  the  defendant  company 
issued  an  accident  policy  of  insurance  on  the  life  of  A.  Prior  to  the  issuing  of 
the  policy,  A  had  been  a  canvasser  for  defendant  company  and  while  so  acting 
had  been  directed  to  be  careful  not  to  insure  insane  persons.  Before  the  policy 
was  issued  A  had  been  insane  but  had  been  discharged  from  a  hospital  cured. 
He  did  not  disclose  this  fact,  but  said  that  there  were  no  circumstances  ren- 
dering him  peculiarly  liable  to  accident.  Held,  that  no  fraudulent  concealment 
was  shown  and  the  policy  was  not  void  if  the  insured  did  not  conceal  any 
facts  which  in  his  own  mind  were  material  in  making  the  application. 

Misrepresentation.  —  A  misrepresentation,  if  material,  will 
ivoid  the  policy.  The  same  rules  apply  to  misrepresentations 
in  life  insurance  as  in  fire  insurance,  but  warranties  are  state- 
ments of  facts  which  are  a  part  of  the  policy  and  must  be 
strictly  performed  or  the  policy  is  avoided. 

Cushman  v.  Life  Insurance  Co.,  63  N.Y.  404,  was  a  case  in  which,  by  the 
terms  of  a  life  insurance  policy,  the  statements  made  by  the  insured  in  his 
application  were  made  a  part  of  the  contract,  and  it  provided  that  if  they  were 
untrue  the  policy  was  avoided.  The  applicant  stated  that  he  had  never  been 
afflicted  with  a  certain  disease.  It  was  shown  that  he  had  twice  been  ill  with 
this  disease  before  the  policy  was  issued.  Held,  that  the  statement  was  a  war- 
ranty and  its  breach  avoided  the  policy. 


i/d  INSURANCE 

Life  insurance  companies  generally  ask  many  questions  in 
their  applications  and  unless  the  application  is  expressly  incor- 
porated in  and  made  a  part  of  the  policy,  the  answers  to  these 
questions  are  considered  as  representations  and  not  as  warranties. 
If  they  are  so  included,  they  must  be  strictly  true. 

Dwight  V.  Germania  Life  Insurance  Co.,  103  N.Y.  341,  was  a  case  in  which, 
in  an  application  for  insurance  on  his  life,  the  applicant  in  answer  to  a  question 
as  to  whether  he  was  then  or  had  been  engaged  in  or  connected  with  the  man- 
ufacture or  sale  of  intoxicating  liquors  answered,  "  No."  By  the  terms  of  the 
policy  the  assured  warranted  the  truth  of  his  answers  and  it  was  stipulated  that 
any  substantial  deviation  from  the  truth  in  an  answer  would  avoid  the  policy. 
It  was  shown  that  the  insured  had  kept  a  hotel  for  three  and  one  half  years 
prior  to  the  issuing  of  a  policy,  and  while  he  had  no  bar  he  kept  wine  and 
liquors  which  he  sold  to  his  guests.  Held,  that  the  answer  was  false  and  the 
policy  was  avoided. 

If  the  questions'  are  not  answered  or  are  only  partially 
answered,  there  is  no  misrepresentation  or  breach  of  warranty. 

Phoenix  Life  Insurance  Co.  v.  Raddin,  120  U.S.  183,  was  a  case  in  which 
in  the  application  this  question  was  asked,  "  Has  any  application  been  made 
to  this  or  any  other  company  for  insurance  on  the  life  of  the  party?  If  so,  with 
what  result?"  To  this  inquiry  there  was  no  answer.  Held,  that  the  failure  to 
disclose  unsuccessful  applications  for  additional  insurance  did  not  avoid  the 
policy.  The  issuing  of  the  policy  without  further  inquiry  was  a  wdver  by 
the  company  of  the  right  to  inquire  further. 

Forms  of  Policies.  —  There  is  no  standard  form  of  life  insur- 
ance poHcy,  and  the  forms  of  the  different  companies  vary 
materially.  It  is  customary  to  have  the  policy  provide  that  the 
application  be  made  a  part  of  the  contract,  thereby  making  the 
statements  in  the  application  express  warranties.  So  a  denial 
that  one  is  affected  with  a  disease  avoids  the  policy  if  untrue. 
The  application  often  inquires  as  to  what  other  insurance  is 
carried,  and  a  deceptive  statement  on  this  point  is  fatal  to 
the  policy.  So  also  a  statement  as  to  age  is  material  and  the 
answer  must  be  correct. 

In  ^tna  Life  Insurance  Co.  v.  France,  91  U.S.  510,  the  insured  in  his 
application  agreed  that  if  the  answers  made  by  him  were  untrue,  the  policy 
should  be  null  and  void.  Held,  that  the  insurance  company  was  not  liable  if 
the  statements  were  untrue.  In  this  case  the  applicant's  age  was  asked  and  he 
answered  thirty,  but  it  was  shown  he  was  from  thirty-five  to  thirty-seven. 


UFE  INHURANCE  279 

Payment.  —  If  the  policy  contains  a  provision  that  the  insur- 
ance ceases  unless  the  premium  is  paid  when  due  and  that  the 
policy  is  not  to  take  effect  until  the  first  premium  is  actually 
paid,  the  condition  must  be  strictly  compUed  with  or  the  poUcy 
fails.     Prompt  payment  is  essential. 

In  Holly  V.  Life  Insurance  Co.,  105  N.Y.  437,  the  policy  upon  plaintiflPs  life 
contained  a  provision  that  in  case  of  non-payment  of  premium  when  due  by 
the  terms  of  the  policy  it  should  be  forfeited.  Held,  that  punctuality  in  the 
payment  of  premiums  in  the  case  of  life  insurance  is  of  the  very  essence  of  the 
contract,  and  if  a  payment  is  not  made  when  due,  the  company  has  a  right  to 
forfeit  the  policy  if  such  is  the  contract. 

Sickness  or  other  inability  to  comply  with  the  terms  of  pay- 
ment offers  no  excuse.  If  the  insurer  accepts  the  payment  of 
the  premium  after  it  is  due,  the  breach  will  be  waived. 

Suicide.  —  If  the  poUcy  contains  no  express  stipulation  to  the 
contrary,  the  insurance  company  is  liable  on  a  policy  if  the  party 
insured  commits  suicide,  in  case  a  third  party  is  the  beneficiary. 
If  the  insured  is  the  beneficiary,  the  rule  will  be  otherwise.  The 
policy  frequently  contains  a  clause  exempting  the  company  from 
liability  if  the  insured  commits  suicide. 

Fitch  V.  Life  Insurance  Co.,  59  N.Y.  557,  was  an  action  on  a  policy  of  life 
insurance  taken  out  for  the  benefit  of  the  wife  and  children  of  the  insured.  It 
contained  no  clause  forfeiting  it  in  case  of  death  by  suicide.  The  court  held 
that  the  fact  that  the  insured  committed  suicide  would  not  defeat  the  policy. 
The  parties  interested  were  not  bound  by  the  acts  of  the  deceased  after  the 
policy  was  issued,  unless  in  violation  of  some  condition  thereof. 

When  the  exemption  does  not  expressly  state  that  the  com- 
pany shall  not  be  liable  whether  the  insured  be  sane  or  insane, 
the  suicide  clause  does  not  vitiate  the  policy  if  the  suicide  is 
committed  while  the  person  is  insane.  If  the  clause  contains 
these  words,  it  is  vitiated  in  any  event. 

Bigelow  V,  Life  Insurance  Co.,  93  U.S.  284,  was  an  action  upon  a  life  in- 
surance  policy,  which  provided  that  it  should  be  null  and  void  if  the  insured 
died  by  suicide,  "sane  or  insane."  The  company  pleaded  that  he  died  from  a 
pistol  wound,  inflicted  by  his  own  hand,  and  that  he  intended  inflicting  such  a 
wound  to  destroy  his  own  life.  Held,  that  the  policy  was  avoided  even  though 
the  deceased  was  of  unsound  mind  and  unconscious  of  his  acts  when  he 
inflicted  the  wound. 


280  INSURANCE 

Notice  of  Death.  —  In  life  insurance  the  company  generally 
requires  immediate  notice  of  death  and  due  proof  that  the  person 
insured  is  dead. 

5.     MARINE   INSURANCE 

Definition.  —  Marine  insurance  is  a  contract  by  which  the 
insurer  agrees  to  indemnify  the  insured  against  certain  perils  or 
risks  to  which  his  ships,  cargo,  and  profits  may  ^e  exposed  dur- 
ing a -certain  trip  or  during  a  specified  time. 

Insurable  Interest.  —  The  rules  governing  this  class  of  insur- 
ance closely  follow  the  laws  of  life  insurance.  The  person  pro- 
curing the  policy  must  have  an  insurable  interest  in  the  property 
insured.  The  owner  always  has  an  insurable  interest,  even 
though  the  property  has  been  chartered  to  a  person  who  agrees 
to  pay  its  value  in  case  of  loss.  The  charterer  also  has  an  in- 
surable interest  in  the  ship.  Practically  the  same  rules  apply  to 
the  insurable  interest  here  as  in  fite  insurance. 

Oliver  v.  Greene,  3  Mass.  133,  held,  that  a  part  owner  of  a  vessel  who  has 
chartered  the  remainder  with  a  covenant  to  pay  the  value  in  case  of  loss  may 
insure  the  whole  vessel  as  his  property. 

Effect  of  Fraud.  —  The  requirement  of  good  faith  between 
the  parties  is  even  greater  in  marine  insurance  than  in  any  other 
branch  of  insurance.  The  reason  for  this  is  that  the  insured 
has  every  opportunity  to  know  all  of  the  facts  and  the  insurer 
but  limited  opportunity  to  determine  them.  A  concealment  of  a 
material  fact  either  innocently  or  fraudulently  avoids  the  con- 
tract. 

In  Pf'oudfoot  V.  Montefiore,  L.R.  2  Q.  B.  (Eng.)  511,  plaintiff  in  Liverpool 
had  an  agent  in  Smyrna  to  buy  madder  for  him  and  ship  it.  The  agent 
shipped  a  cargo  and  advised  plaintiff  on  January  12,  sending  the  shipping  doc- 
uments on  the  19th.  On  the  23d  the  ship  sailed,  but  it  was  stranded  and  the 
cargo  destroyed  on  the  same  day.  The  agent  got  word  of  the  loss  on  the 
24th,  and  on  the  26th,  the  day  that  the  next  mail  went  to  Liverpool,  he  wrote 
to  plaintiff,  informing  him  of  the  loss,  but  purposely  abstained  from  telegraph- 
ing him  in  order  that  plaintiff  might  not  be  prevented  from  obtaining  in- 
surance. On  the  31st,  plaintiff,  after  receiving  the  letters  of  the  12th  and  19th, 
but  before  receiving  the  letter  of  the  26th  and  without  knowledge  of  the  loss, 
obtained  insurance.  Held,  that  plaintiff  could  not  recover,  as  the  agent  should 
have  telegraphed. 


MARINE  INSURANCE  28 1 

A  material  fact  was  concealed  in  this  case  which  rendered 
the  policy  void  by  reason  of  concealment  and  misrepresentation. 

Misrepresentation.  —  So  a  material  misrepresentation  of  a  fact, 
whether  innocently  or  fraudulently  made,  avoids  the  contract. 
The  rule  is  even  more  strict  here  than  in  fire  insurance. 

Hodgson  V.  Richardson,  i  W.  Black.  (Eng.)  463,  was  an  action  on  a  policy 
of  marine  insurance  obtained  at  and  from  Genoa.  The  load  was  put  on  at 
Leghorn,  bound  for  Dublin,  but  the  vessel  put  in  at  Genoa  and  had  been  there 
about  five  months  before  sailing.  The  defendants  contended  that  the  policy 
was  vitiated  because  of  the  non-disclosure  to  the  insurer  that  the  vessel  was  not 
loaded  at  Genoa.  Held,  that  the  plaintiff  could  not  recover.  The  conceal- 
ment of  the  port  of  loading  vitiated  the  policy. 

Warranty.  —  A  warranty,  as  in  fire  insurance,  must  be  strictly 
performed.  In  marine  insurance  there  are  three  implied  war- 
ranties which  are  understood  in  every  contract.  They  are  in 
respect  to  seaworthiness,  deviation,  and  legality. 

Seaworthiness.  —  There  is  implied  the  warranty  that  the  ship 
is  seaworthy  at  the  time  of  the  commencement  of  the  risk.  A 
ship  is  seaworthy  when  reasonably  fit  to  perform  the  services 
and  encounter  the  ordinary  perils  incident  to  the  voyage.  This 
means  that  the  ship  shall  be  stanch,  properly  rigged,  and  pro- 
vided with  a  competent  master  and  a  suflficient  number  of  seamen. 

In  the  case  of  Thebaud  v.  Insurance  Co.,  52  Hun  (N.Y.)  495,  under  a 
policy  of  marine  insurance  plaintiff  insured  with  defendant  the  steamboat,  Dos 
Hermanos,  on  a  voyage  from  Philadelphia  to  Frontera,  Mexico.  The  defense 
set  up  was  that  the  boat  was  unseaworthy.  It  appeared  that  the  boat  was 
built  simply  for  river  navigation,  and  sank  during  the  ocean  voyage.  Held, 
that  it  was  not  sufficient  to  show  that  the  vessel  was  stanch  and  strong  for  river 
and  smooth  water  navigation,  but  in  order  to  comply  with  the  implied 
warranty  the  plaintiff  was  obliged  to  show  that  everything  that  could  be  done 
to  render  the  vessel  fit  for  the  voyage  had  been  done.  When  the  evidence  is 
without  dispute  that  the  voyage  was  one  for  which  the  vessel  was  not  fitted, 
and  to  the  effect  that  no  precautions  were  taken  to  provide  for  the  perils  which 
were  to  be  encountered,  the  plaintiff  can  not  recover. 

Deviation.  —  The  second  implied  warranty  is  that  there  shall 
be  no  voluntary  deviation  or  departure  from  the  course  fixed  by 
mercantile  usage,  for  the  voyage  contemplated  by  the  policy ; 
and  also  that  there  shall  be  no  unreasonable  delay  in  commencing 
or  making  the  voyage. 


282  INSURANCE 

In  the  case  of  Burgess  v.  Marine  Insurance  Co.,  126  Mass.  70,  a  vessel  was 

msured  against  perils  of  the  seas,  "At  and  from  Plymouth  to  Banks,  cod- 
fishing,  and  at  and  thence  back  to  Plymouth."  The  premium  was  at  a  certain 
rate  per  month,  and  the  policy  was  to  end  with  the  voyage.  The  vessel  sailed 
with  the  usual  quantity  of  bait,  expecting,  as  usual,  to  catch  more  at  the 
Banks.  In  previous  years  bait  at  that  place  had  been  plenty,  but  this  year 
it  was  scarce  ;  so,  being  unable  to  get  a  supply,  the  master  went  to  the  nearest 
port  for  bait,  and  then  returned  to  the  fishing  grounds.  The  vessel  was  after- 
wards lost  by  the  perils  of  the  sea.  Held,  that,  in  the  absence  of  evidence  of 
usage  to  put  into  port  for  bait  under  such  circumstances,  the  doing  so  was  a 
deviation  which  discharged  the  insurer. 

If  no  course  has  been  fixed  by  mercantile  usage,  such  a  course 
must  be  pursued  as  would  appear  reasonably  direct  and  advan- 
tageous to  a  master  of  ordinary  skill.  A  deviation  is  justified 
when  caused  by  circumstances  over  which  neither  the  owner 
nor  master  had  any  control,  as  when  forced  from  the  course  by 
stress  of  weather,  a  mutinous  crew,  etc. 

Turner  v.  Insurance  Co.,  25  Me.  515,  held,  that  if  the  master  of  a  vessel 
which  has  been  insured,  in  departing  from  the  usual  course  of  the  voyage  from 
necessity,  because  of  leaking  of  the  vessel,  acts  in  good  faith  and  according  to 
his  best  judgment,  and  has  no  other  object  than  to  conduct  the  vessel  by  the 
safest  and  shortest  course  to  the  port  of  destination,  the  insurance  will  not  be 
forfeited. 

Legality.  —  The  third  implied  warranty  is  that  the  voyage 
shall  be  legal,  both  in  its  nature  and  in  the  manner  in  which  it 
is  prosecuted.  Smuggling  voyages  and  trading  trips  to  an 
enemy's  port  are  cases  of  illegal  voyage. 

Losses.  —  The  loss  may  be  total,  in  which  case  the  whole 
insurance  is  ordinarily  recoverable ;  or  it  may  be  partial,  and 
then  only  a  pro  rata  part  can  be  recovered.  When  the  loss  is 
total,  it  may  be  an  actual  total  loss  or  a  constructive  total  loss. 
An  actual  total  loss  occurs  when  the  subject  insured  wholly 
perishes,  as  when  a  vessel  is  so  completely  wrecked  that  it  can 
not  be  repaired. 

Carr  v.  Insurance  Co.,  109  N.Y.  504,  held,  that  when  a  policy  of  insurance 
upon  a  vessel  is  against  "  actual  total  loss  only,"  if  the  vessel  is  afloat  or  it  is 
practicable  to  put  her  afloat,  or  if  she  is  capable  of  being  repaired,  at  any 
expense,  it  is  not  such  a  total  loss. 


CASUALTY  INSURANCE  283 

A  constructive  total  loss  occurs  when  the  article  insured  is  so 
far  damaged  or  lost  that  it  can  not  be  reclaimed  or  repaired, 
except  at  a  greater  cost  than  its  value.  For  example,  a  vessel 
may  be  sunk  in  shallow  water,  but  the  cost  of  raising  it  would 
be  greater  than  it  is  worth. 

Insurance  Co.  v.  Fogarty,  19  Wall.  (U.S.)  640,  was  a  case  in  which  a  sugar- 
packing  machine  was  insured,  and  no  part  was  delivered  capable  of  use.  Held, 
to  be  a  total  loss,  although  more  than  half  the  pieces,  in  number  and  value, 
may  have  been  deUvered,  and  though  they  would  have  some  value  as  old  iron. 
To  constitute  a  total  loss,  it  is  not  necessary  that  there  should  be  an  absolute 
extinction  or  destruction  of  the  thing  insured,  so  that  nothing  of  it  can  be 
delivered  at  the  point  of  destination. 

The  rule  adopted  in  some  jurisdictions  is,  that  if  the  property 
insured  by  a  marine  insurance  policy  is  damaged  to  such  an 
extent  that  its  value  is  reduced  one  half  or  more ;  that  is,  if  there 
is  a  one  half  loss  or  more,  the  person  insured  may  abandon  the 
property  as  a  constructive  total  loss,  and  claim  the  full  amount 
of  insurance.  Notice  of  the  abandonment  must  be  given  the 
insurers  so  that  they  may  take  measures  to  claim  the  property 
and  avail  themselves  of  whatever  may  be  saved. 

6.    CASUALTY  INSURANCE 

Definition.  —  Casualty  insurance  is  an  indemnity  against  loss 
resulting  from  bodily  injury  or  the  destruction  of  certain  kinds 
of  property.  It  may  be  accident  insurance,  which  is  an  indem- 
nity against  personal  injury  by  accident,  or  it  may  be  one  of 
the  numerous  classes  of  insurance  that  have  sprung  up  within 
the  past  few  years,  granting  indemnity  against  almost  every 
conceivable  form  of  catastrophe.  Among  these  special  forms 
of  casualty  insurance  may  be  mentioned  plate  glass,  boiler,  tor- 
nado, employer's  liability,  fidelity,  credit,  and  title  insurance. 

Accident  Insurance.  —  Accident  insurance  is  a  branch  of  life 
insurance,  the  latter  insuring  against  death  by  any  cause,  while 
the  former  insures  against  death  or  injury  caused  by  accident. 
This  class  of  insurance  usually  provides  a  certain  payment  in 
case  of  accidental  death,  a  weekly  indemnity  for  either  perma- 


284  INSURANCE 

aent  or  total  disability  by  reason  of  accident,  and  a  fixed  sum 
for  such  permanent  injury  as  the  loss  of  one  or  both  of  the 
hands,  feet,  or  eyes.  An  accident  in  this  sense  is  an  unforeseen 
event  which  results  in  injury  to  one's  person.  Being  thrown 
from  a  wagon  in  a  runaway  and  being  struck  by  a  falling 
timber,  etc.,  are  accidental  injuries. 

In  the  case  of  the  North  American  Insurance  Co.  v.  Burroughs^  69  Pa.  St. 
43,  the  injuries  were  caused  while  the  insured  was  pitching  hay.  The  handle 
of  the  fork  slipped  through  his  hands  and  struck  him  in  the  body,  inflicting 
an  injury  which  caused  inflammation  resulting  in  his  death.  Held,  that  the 
death  was  the  result  of  an  accident. 

Fidelity  Gr*  Casualty  Co.  v.  Johnson,  72  Miss.  333,  held,  that  death  at  the 
hands  of  a  mob  by  hanging  is  within  the  terms  of  a  policy  insuring  against 
"  bodily  injuries  sustained  through  external,  violent,  and  accidental  means." 

Unless  the  policy  expressly  excludes  death  by  poisoning,  the 
accident  poHcy  is  held  to  cover  death  due  to  the  accidental 
taking  of  poison. 

Healey  v.  Mutual  Accident  Association,  133  111.  556,  held,  that  death  caused 
by  accidentally  taking  and  drinking  poison  is  a  death  produced  by  bodily  in- 
juries received  through  "  external,  violent,  and  accidental  means,"  within  the 
meaning  of  a  policy  of  insurance  providing  indemnity  in  case  of  death  result- 
ing through  such  causes.  The  death  in  such  a  case  may  be  regarded  as 
received  through  violent  means. 

Employer's  Liability  Insurance.  —  Employer's  liability  insur- 
ance is  a  class  of  protection  aiTorded  to  employers  of  men  en- 
gaged in  manufacturing  or  other  business,  against  liability  for 
damages  for  personal  injuries  caused  by  the  negligence  of  the 
employer  or  his  servants.  The  occasion  for  this  class  of  insur- 
ance has  arisen  because  of  the  fact  that  as  soon  as  an  employee 
in  a  factory  is  killed  by  reason  of  some  faulty  machinery  his 
survivors  sue  the  company  for  damages.  The  insurance  com- 
pany in  which  the  employer  has  insured  this  risk  defends  the 
case,  and  if  the  proprietor  is  defeated,  the  insurance  company 
pays  the  loss. 

In  People's  Ice  Co.  v.  Employers''  Liability  Assurance  Co.,  i6r  Mass.  122, 
plaintiff  in  his  application  for  insurance  represented  that  he  was  an  ice  dealer 
and  that  the  work  carried  on  by  his  employees  was  cutting  and  handling  ice. 
The  insurance  was  to  cover  an  expenditure  in  wages  of  $5000  each  year.    The 


CASUALTY  INSURANCE  285 

plaintiff  warranted  his  statements  in  the  application  to  be  true.  Held,  that 
injuries  caused  to  employees  by  the  fall  of  an  ice  house  while  in  the  process 
of  construction  by  hira,  not  in  the  season  for  cutting  ice,  were  not  within  the 
policy. 

Fidelity  Insurance.  —  Fidelity  or  guaranty  insurance  is  a  con- 
tract by  which  an  employer  is  insured  against  loss  by  the  fraud 
or  dishonesty  of  his  employees.  It  is  in  fact  a  guarantee  of  the 
honesty  of  an  employee.  These  insurance  companies  issue  bonds 
guaranteeing  the  faithful  performance  of  contracts  as  well,  and 
in  all  cases  in  which  bonds  are  required  it  is  now  the  common 
practice  to  purchase  them  of  a  fidelity  insurance  company. 

In  People  v.  Rose,  174  111.  310,  the  court  said  that  the  business  of  guarantee- 
ing the  fidelity  of  persons  holding  public  or  private  places  ot  trust,  and  the 
performance  by  persons,  firms,  and  corporations  of  contracts,  bonds,  and  other 
undertakings,  is  guaranty  insurance. 

Credit  Insurance.  —  Credit  insurance  protects  merchants  and 
tradesmen  from  loss  through  the  insolvency  or  dishonesty  of 
their  customers.  For  a  certain  premium  the  insurance  company 
guarantees  the  merchant  against  bad  debts.  The  merchants 
must  usually  bear  a  certain  small  per  cent,  and  all  losses  over 
that  amount  are  paid  by  the  insurance  company. 

In  Tebbets  v.  Mercantile  Credit  Guarantee  Co.,  73  Fed.  Rep.  (U.S.)  95,  de- 
fendant in  consideration  of  a  premium  paid,  insured  plaintiffs  against  losses  in 
their  business  during  the  year  1893.  The  application,  which  was  a  part  of  the 
policy,  stated  the  amount  of  their  gross  sales  for  the  preceding  14 
months  and  their  total  losses  for  that  period.  The  defendant  agreed  to  pur- 
chase of  plaintiffs  an  amount,  not  to  exceed  $15,000,  of  uncollectable  debts 
arising  during  1893  in  excess  of  one  half  of  one  per  cent  of  their  total  gross 
sales  and  deliveries  subject  to  certain  conditions.  The  policy  contained  this 
provision,  "  The  contract  is  issued  on  the  basis  that  the  yearly  sales  of  the 
insured  are  between  $1,800,000  and  $2,500,000."  Held,  that  this  was  not  a 
stipulation  that  they  would  equal  that  amount,  requiring  that  the  one  half  of 
one  per  cent  must  be  computed  on  at  least  $1,800,000,  but  that  plaintiffs  were 
entitled  to  receive  their  losses,  not  exceeding  $15,000,  in  excess  of  one  half  of 
one  per  cent  on  their  actual  total  sales. 

Title  Insurance.  —  Title  insurance  is  a  guaranty  to  the  owner 
of  real  property  that  his  title  is  clear.  It  is  an  insurance  against 
defects  in  the  title  to  the  property  insured,  and  in  case  of  loss 


286  INSURANCE 

by  reason  of  liens  or  incumbrances  prior  to  tbe  interest  of  the 
insured,  the  company  indemnifies  him. 

Plate  Glass  Insurance.  —  Plate  glass  insurance  is  another 
branch  of  casualty  insurance  frequently  employed.  Many  of 
the  larger  stores  and  offices  have  plate  glass  fronts  representing 
a  large  investment,  and  to  avoid  the  danger  of  loss  the  owners 
employ  insurance  companies  to  take  the  risk  of  the  breaking  of 
these  windows.  A  certain  premium  is  charged  by  the  companies 
assuming  this  risk,  the  premium  being  based  upon  the  cost  price 
of  the  windows. 

Elevator  Insurance.  —  Elevator  insurance  consists  of  a  con- 
tract which  covers  the  risk  incidental  to  the  use  of  elevators, 
including  both  the  damage  to  the  elevators  themselves  and  to 
persons  or  property  that  may  be  injured  by  the  use  of,  or  by 
accident  occurring  to,  such  elevators. 

Steam  Boiler  Insurance.  —  Because  of  the  frecjuent  explosions 
occurring  from  the  use  of  steam  boilers  the  damage  caused  not 
only  to  the  boilers  themselves  but  to  surrounding  property  is 
insured  under  this  head.  This  insurance  does  not  cover  a  loss 
by  fire,  even  though  it  be  caused  by  the  explosion,  but  does  cover 
the  injury  to  persons  or  property  from  such  cause. 

QUESTIONS    ON   INSURANCE 

1.  Define  insurance. 

2.  What  is  an  insurable  interest  that  is  sufficient  to  uphold  a  fire  insurance 
policy  ? 

3.  A  owns  a  house  and  lot  which  is  mortgaged  to  B  for  $1000.  C  has  a 
lease  of  the  property  for  one  year,  and  D  has  agreed  with  A  to  purchase  the 
property,  A  having  given  him  a  contract  whereby  he  is  to  deed  it  to  D  as  soon 
as  D  has  paid  $1000  on  the  purchase  price.  Which  of  the  above  parties  have 
an  insurable  interest  in  the  property  ? 

4.  Did  A,  the  owner  in  the  above  case,  lose  his  insurable  interest  in  the 
house  and  lot  when  he  mortgaged  it  to  B?  Did  he  lose  his  insurable  interest 
when  he  gave  the  contract  to  D? 

5.  Must  the  contract  of  insurance  be  in  writing?  In  such  a  contract  what 
must  be  definitely  agreed  upon? 

6.  Moore  goes  to  Emery,  an  insurance  agent,  and  asks  him  to  insure  his 
house  and  lot  for  $5000,  giving  him  a  description  of  the  property.     Emery 


INSURANCE    ^  287 

agrees  to  insure  it  for  one  year  and  states  that  the  premium  will  be  $12. 
Emery  has  authority  to  bind  the  insurance  company.  Moore's  house  burns 
before  the  policy  of  insurance  is  delivered  to  him.     Can  he  recover? 

7.  If,  in  the  above  case,  Moore's  house  had  been  set  on  fire  twice  within 
one  month  previous  to  applying  for  the  insurance,  would  the  fact  that  this 
information  was  not  imparted  to  Epiery  affect  the  contract? 

8.  A,  upon  applying  to  B,  an  insurance  agent,  for  insurance  upon  a  ware- 
house that  he  owns,  is  asked  the  distance  of  the  warehouse  from  the  railroad, 
as  tlie  insurance  company  will  not  insure  such  buildings  within  30  feet  of  the 
track.  A,  believing  his  answer  to  be  true,  states  that  the  warehouse  is  about 
40  feet  from  the  track,  as  the  party  from  whom  he  has  recently  purchased  the 
building  stated  that  to  be  the  distance  of  the  building  from  the  track.  The 
building,  in  fact,  was  less  than  25  feet  from  the  track.  Would  this  affect  the 
policy  ? 

9.  Distinguish  between  concealment,  misrepresentation,  and  warranty. 

10.  In  which  class  would  the  statement  in  question  8  fall? 

11.  If  an  insurance  application  which  is  contained  in  the  policy  is  left 
blank,  does  this  affect  the  policy? 

12.  In  a  policy  of  insurance  in  which  the  application  was  attached  to  and 
made  a  part  of  the  policy,  the  party  obtaining  the  insurance  had  represented 
that  the  building  insured  was  brick  for  the  first  two  stories  and  frame  the 
third  story,  when,  in  fact,  the  building  was  brick  for  only  the  first  story  and 
the  remaining  stories  were  frame.     Did  this  avoid  the  policy? 

13.  What  is  meant  when  a  standard  form  of  fire  insurance  policy  is 
spoken  of? 

14.  A  insured  his  household  furniture  located  in  the  lower  fiat  with  other 
tenants  occupying  the  same  building  above.  Fire  broke  out  in  the  upper 
floors  and  A's  goods  were  damaged  by  smoke  and  water,  but  the  fire  did  not 
reach  him.     Can  A  recover  the  damage  under  his  fire  insurance  policy? 

15.  If,  in  the  above  case,  A  had  moved  his  goods  out  to  avoid  their  being 
ruined  by  water,  and  temporarily  placed  them  across  the  street  until  a  place 
could  be  found  to  store  them,  and  about  an  hour  after  they  were  placed 
there  a  certain  part  of  the  goods  was  stolen,  could  the  value  of  the  stolen 
goods  be  recovered  under  the  fire  insurance  policy? 

16.  If,  in  the  above  case,  the  remainder  of  the  goods  left  in  the  street  were 
damaged  by  rain  which  came  immediately  upon  their  being  removed  from  the 
building,  could  this  damage  be  recovered  from  the  fire  insurance  policy? 

17.  If,  in  question  14,  the  fire  had  been  caused  by  lightning  and  A's  goods 
had  been  destroyed  by  the  fire,  could  he  have  recovered,  nothing  having  been 
said  in  the  policy  about  lightning? 

18.  Evans  insures  his  house  and  barn,  and  in  the  policy  there  is  a  condi- 
tion that  the  insurer  will  be  liable  for  fire  by  lightning.  Lightning  strikes  his 
barn,  tearing  off  the  roof  and  greatly  damaging  it,  but  the  barn  does  not  catch 
fire.     Can  Evans  recover  the  damage  from  the  insurance  company? 


288  .    INSURANCE 

19.  If,  in  the  above  case,  Evans's  barn  had  been  set  on  fire  by  an  incendiary, 
could  he  have  recovered  the  damages  from  the  insurance  company? 

20.  If,  in  question  18,  Evans,  during  a  period  of  temporary  insanity,  set  fire 
to  the  barn  himself,  could  he  recover  from  the  insurance  company? 

21.  A  insures  his  household  furniture  while  living  in  a  certain  house  on 
Edmunds  Street.  Within  a  month  after  taking  out  such  insurance,  he  moves 
about  one  block  away  to  a  house  on  Meigs  Street.  Both  of  the  houses  are 
frame  dwellings,  and  there  is  apparently  no  difference  in  the  risk.  The  policy 
contains  a  clause  that  if  the  property  is  removed  without  the  consent  of  the 
insurer  the  policy  is  no  longer  of  any  effect.  Shortly  after  moving,  A's  furni- 
ture burns.     Can  he  recover  of  the  company? 

22.  If  A  takes  out  a  fire  insurance  policy  of  $1000  on  a  house  worth  $2000 
and  the  house  burns,  what  amount  can  he  recover?  If  the  insurance  policy 
is  for  $3000  and  the  house  is  worth  $2000,  how  much  can  he  recover? 

23.  Levitt  insures  his  house  and  then  sells  it.  The  policy  of  insurance 
contains  the  alienation  clause.  Shortly  after  selling  the  house  it  burns.  Can 
Levitt  recover  under  the  policy? 

24.  If,  in  the  above  case,  Levitt  had  mortgaged  instead  of  sold  his  house, 
could  he  have  recovered  under  the  policy? 

25.  If,  in  question  23.  Levitt  upon  selling  the  property  had  assigned  the 
policy  to  the  purchaser  without  obtaining  the  consent  of  the  company,  could 
the  purchaser  have  recovered  under  the  policy  in  case  of  fire? 

26.  Under  the  standard  form  of  policy,  what  is  required  of  the  insured 
immediately  after  a  loss  ? 

27.  Define  life  insurance.     The  insured.    The  beneficiary. 

28.  In  life  insurance,  what  constitutes  an  insurable  interest? 

29.  Has  a  man  an  insurable  interest  in  the  life  of  his  wife?  In  the  life 
of  his  brother?     In  the  life  of  his  business  partner?     In  the  life  of  his  debtor? 

30.  A  takes  out  an  insurance  policy  upon  the  life  of  B,  his  business  partner, 
who  owes  him  $10,000.  After  the  policy  has  been  running  about  two  years, 
A  and  B  dissolve  partnership,  and  B  pays  A  all  that  he  owes  him ;  but  A 
continues  the  policy  upon  B's  life.     Is  it  valid  ? 

31.  A  insures  his  own  life  in  favor  of  B,  his  wife.  After  two  years  he 
obtains  a  divorce  from  her,  then  marries  C,  and,  wishing  to  make  her  the 
beneficiary  under  his  policy,  seeks  to  change  it.     Can  this  be  done? 

32.  In  an  application  for  a  life  insurance  policy.  A,  the  applicant,  was  asked 
if  any  of  his  brothers  or  sisters  had  died  with  consumption.  No  answer  was 
given.  A  had,  in  fact,  lost  two  brothers  by  this  disease.  The  policy  was 
issued.     Would  the  concealment  render  it  void? 

33.  D wight  applied  to  a  life  insurance  company  for  a  policy  of  insurance 
upon  his  life.  He  stated  in  answer  to  a  question  that  he  was  engaged  in 
running  a  grocery,  while  in  fact  he  was  a  farmer.  One  occupation  was  not 
considered  a  greater  risk  than  the  other  by  the  insurance  company.  Would 
this  affect  the  policy  ? 


INSURANCE  289 

34.  If,  in  the  preceding  case,  the  answers  of  Dwight  had  been  included  in 
his  policy  and  made  a  part  of  it,  would  the  misstatement  made  by  him  affect 
the  policy? 

35.  If  a  policy  contains  no  stipulation  to  the  contrary,  is  the  insurance 
company  liable  when  the  insured  party  commits  suicide  and  a  third  party  is 
the  beneficiary? 

36.  Is  the  insurance  company  liable  if  the  estate  of  the  insured  is  the 
beneficiary? 

37.  The  insurance  policy  contains  a  stipulation  that  the  company  will  not 
be  liable  if  the  insured  commits  suicide,  and  he  dies  from  the  effects  of  a 
revolver  bullet  fired  by  himself  while  insane.  Is  the  company  liable  on  the 
policy  ? 

38.  If  the  stipulation  in  the  policy  had  been  that  the  company  shall  not  be 
liable  if  death  is  caused  by  suicide  committed  when  either  sane  or  insane, 
would  the  company  have  been  liable  in  the  above  case? 

39.  Define  marine  insurance.  Is  the  insured  required  to  have  an  insurable 
interest  in  this  class? 

40.  What  is  the  effect  of  the  concealment  of  a  material  fact  innocently 
made  in  this  class  of  insurance? 

41.  Richardson  loads  his  vessel  with  merchandise  at  Albany,  runs  it  down 
the  Hudson  River  to  New  York,  and  there  obtains  a  marine  policy  on  the  ship 
and  cargo  at  and  from  New  York  to  London.  He  did  not  state  anything  in 
reference  to  the  loading  at  Albany.     Would  this  affect  the  policy? 

42.  What  are  the  three  implied  warranties  in  marine  insurance? 

43.  Distinguish  between  actual  total  loss  and  constructive  total  loss. 

44.  What  is  casualty  insurance  ?     Accident  insurance? 

45.  Elliott  took  out  an  accident  policy  insuring  him  against  "  bodily  injuries 
sustained  through  external  violence  and  accidental  means."  He  was  killed  by 
accidentally  drinking  poison.     Was  the  company  liable? 

46.  If  Elliott  had  been  struck  by  a  timber  blown  from  a  building  being 
erected,  would  the  company  have  been  liable? 

47.  What  is  employer's  liability  insurance? 

48.  What  is  fidelity  or  guaranty  insurance? 

49.  Define  credit  insurance. 

50.  Define  title  insurance. 

5 1 .  Define  plate  glass  insurance. 

52.  Define  elevator  insurance. 

53.  Define  steam  boiler  insurance. 


COM.  Tjvw — 1:9 


REAL    PROPERTY 

I.     IN   GENERAL 

Definition.  —  Real  property  or  real  estate  is  defined  as  includ- 
ing such  things  as  are  fixed,  permanent,  and  immovable,  com- 
prising land  and  whatever  is  affixed  to  and  issuing  out  of  the 
land.  It  will  therefore  be  seen  that  it  includes  not  only  the  land 
itself,  but  buildings  erected  thereon,  as  well  as  trees  growing 
therefrom  and  oils  and  minerals  included  within  the  land 
extending  downward  to  the  center  of  the  earth  and  upward 
indefinitely. 

Aiken  v.  Benedict,  39  Barb.  (N.Y.)  400,  was  a  case  in  which  it  was  held 
that  an  action  for  damages  would  lie  against  one  who  erected  a  building  upon 
the  line  of  his  own  premises,  so  that  the  eaves  or  gutters  projected  over  the 
land  of  his  neighbor. 

Standing  water  belongs  to  the  owner  of  the  soil,  but  the 
owner  of  the  land  has  only  the  right  to  use  and  enjoy  running 
waters,  having  the  exclusive  right  to  fish,  sail,  etc.,  in  the  waters 
over  his  land. 

Ocean  Grove  v.  Asbury  Park,  40  N.J.  Eq.  447,  was  a  case  in  which  the 
plaintiffs  bored  in  their  own  land  for  water  over  400  feet,  and  procured  a  flow 
of  50  gallons  per  minute.  The  defendants  then  sank  a  shaft  8  feet  less  in 
depth  than  plaintiffs,  on  land  of  a  third  party  where  they  had  permission  to 
bore.  This  shaft  was  500  feet  from  plaintiff's  well,  and  a  flow  of  30  gallons 
per  minute  was  obtained.  As  soon  as  this  well  started,  plaintiff's  flow  de- 
creased to  30  gallons  per  minute.  The  defendants  proposed  to  sink  other 
shafts  still  nearer  to  plaintiff's.  Held,  that  they  had  a  right  so  to  do,  and  the 
court  would  not  enjoin  the  defendants  from  either  sinking  other  wells  or  from 
continuing  to  use  this  well. 

In  the  case  of  navigable  waters  there  is  no  such  right,  as  the 
title  to  the  soil  under  them  is  held  by  most  of  the  authorities 
to  belong  to  the  state.     In  waters  that  are  not  navigable  the 

290 


IN  GENERAL 


291 


owners  of  the  land  on  each  side,  as  a  general  rule,  own  to  the 
center  of  the  stream  or  lake. 

Cooley  V.  Golden,  wj  Mo.  33,  held,  that  a  grantee  from  the  United  States, 
of  land  in  Missouri  on  the  banks  of  a  navigable  river,  such  as  the  Missouri 
River,  takes  only  to  the  vi^ater's  edge  and  not  to  the  middle  of  the  stream. 
The  owner  of  the  bank  is  not  the  owner  of  an  island  which  springs  up  in  the 
river,  no  matter  whether  it  be  on  one  side  or  the  other  of  the  center  of  the 
stream. 

Ice  belongs  to  the  owner  of  the  land  over  which  it  forms, 
except  when  it  is  on  navigable  waters,  in  which  case  it  belongs 
to  the  one  first  appropriating  it. 

State  V.  Pottmeyer,  33  Ind.  402,  held,  that  when  the  water  of  a  flowing 
stream,  not  navigable,  freezes  while  in  its  natural  channel,  the  ice  attached  to 
the  soil  constitutes  a  part  of  the  land,  and  belongs  to  the  owner  of  the  bed 
of  the  stream,  who  has  a  right  to  remove  it.  A  person  who  owns  the  land  on 
one  side  and  cuts  the  ice  beyond  the  center  of  the  stream  is  liable  to  the 
owner  of  the  land  lying  under  the  ice  which  was  taken. 

In  the  case  of  Wood  v.  Fowler,  26  Kans.  682,  it  was  held  that  the  owner 
of  the  bank  along  the  Kansas  River,  a  navigable  river,  does  not  own  to  the 
center  of  the  stream,  neither  does  he  own  the  ice  which  is  formed  on  the 
stream  adjacent  to  his  land  without  first  taking  possession  of  it. 

We  have  considered  on  pages  55  and  86  the  cases  in  which 
trees,  crops,  and  grass  are  a  part  of  the  realty,  also  the  question 
as  to  when  fixtures  become  realty  and  when  they  retain  their 
character  as  personalty. 

Corporeal  and  Incorporeal  Real  Property.  —  Corporeal  real 
property  includes  the  land  itself  and  the  buildings,  trees,  min- 
erals, and  other  tangible  appurtenances  thereto.  The  examples 
of  real  property  just  discussed  belong  to  this  class.  Incorporeal 
real  property  is  an  intangible  right  in  the  land  which  does  not 
amount  to  the  ownership  of  it.  The  principal  illustration  is  an 
easement,  which  is  defined  as  a  right  that  the  owner  of  one 
tract  of  land  may  exercise  over  the  land  of  another.  A  right  of 
way  which  a  man  has  over  the  land  of  his  neighbor  for  the  pur- 
pose of  reaching  his  own  land  is  an  easement.  Lots  in  a  city 
are  sometimes  sold  with  the  covenant  that  the  purchaser  will 
not  build  within  a  given  number  of  feet  from  the  street.  This 
creates  an  easement  in  favor  of  the  seller.  The  easement  may 
be  granted  perpetually  or  for  a  limited  time. 


292  REAL  PROPERTY 

In  Wolfe  V.  Frost,  4  Sandf.  Ch.  (N.Y.)  72,  it  was  held  that  an  agreement 
between  the  owners  of  adjacent  city  lots  that  if  one  will  build  a  dwelling 
upon  his  lot  three  feet  back  from  the  line  of  the  street  the  other  will  set 
his  buildings  back  the  same  distance  when  he  builds,  creates  an  easement  in 
the  party  so  building  in  the  land  of  the  other. 

Peck  V.  Conway,  119  Mass.  546,  was  a  case  in  which  A,  the  owner  of  a 
large  tract  of  land,  conveyed  a  portion  to  B  with  the  reservation  in  the  deed 
"  That  no  building  is  to  be  erected  by  the  said  B,  his  heirs,  or  assigns,  upon 
the  land  herein  conveyed."  A  retained  the  balance  of  the  land  as  his  home- 
stead and  later  sold  to  C.  B  afterwards  sold  to  D  without  making  any  men- 
tion of  the  reservation.  Held,  that  the  reservation  created  an  easement  in  B  s 
land  and  for  the  benefit  of  A's  adjoining  property,  and  it  could  be  enforced 
by  C  against  B's  grantee. 


2.     ESTATE   IN   LAND 

Definition.  —  The  estate  is  the  interest  which  one  has  in  land. 
This  interest  may  amount  to  absolute  ownership  or  it  may  be 
only  a  temporary  or  conditional  ownership.  Under  the  early 
English  law,  what  is  called  the  feudal  system  was  in  force  and 
the  absolute  title  to  all  real  property  was  in  the  king,  all  others 
holding  under  him  as  tenants.  The  king  generally  granted  large 
tracts  of  land  to  his  nobles  or  followers,  who  in  return  for  the 
grant  rendered  him  certain  military  service  in  the  wars  which 
were  frequently  occurring  between  the  different  nations  in  those 
times.  Each  follower  of  the  king  had  his  followers  or  servants  to 
whom  he  rented  the  land,  and  who  gave  him  a  certain  amount 
of  their  time  as  soldiers  for  the  king.  The  estate  of  the  tenant 
in  the  land  was  called  "  fee."  This  feudal  system  does  not 
exist  in  the  United  States,  but  many  of  the  terms  and  rules  still 
used  in  real  property  law  are  derived  from  it. 

Estate  in  Fee  Simple.  Eminent  Domain.  —  Estate  in  fee  simple 
is  the  complete  and  absolute  ownership  of  real  property.  It  is 
an  estate  which  exists  for  a  man  during  his  life,  and  if  not 
disposed  of  by  him,  descends  to  his  heirs.  When  an  estate 
of  this  nature  exists  in  land,  the  owner  can  use  the  land  as  he 
chooses,  provided  he  does  not  cause  injury  to  others,  and  he 
may  dispose  of  it  or  grant  privileges  in  reference  to  it  as  he  may 
desire.     Excepting  the  right  the  state  has  to  take  his  land  for 


ESTATE  IN  LAATD  ^j 

taxes  or  under  the  power  of  eminent  domain,  it  can  not  be  taken 
from  him  without  his  consent,  except  by  creditors  to  pay  his 
debts.  The  land  can  be  taken  by  the  state,  under  the  right  of 
eminent  domain,  for  pubHc  use  only,  as  for  a  road,  railway,  etc, 
and  in  every  case  just  and  adequate  compensation  must  be  given 
the  owner.  This  right  is  often  delegated  to  corporations  or  pri- 
vate persons  who  perform  some  public  function,  as  railroad  com- 
panies, telegraph  companies,  etc. 

Beekman  v.  Saratoga  Railroad  Co.,  3  Paige  (N.Y.)  45,  held  that  eminent 
domain  remains  in  the  government  and  it  can  resume  the  possession  of  private 
property  not  only  when  the  safety  but  also  when  the  interest  or  even  the  con- 
venience of  the  state  is  concerned ;  as  when  the  land  is  wanted  for  a  road, 
canal,  or  other  public  improvement,  but  it  can  not  be  taken  without  just  com- 
pensation to  the  owner. 

Were  it  not  for  this  right  in  the  state  the  construction  of  a 
highway  or  a  railroad  might  be  prevented  by  the  arbitrary  acts 
of  a  single  individual. 

Life  Estate.  —  The  fee  in  all  real  property  must  rest  in  some 
one,  but  there  may  be  carved  out  of  it  various  lesser  estates. 
The  absolute  owner  has  the  right  to  do  what  he  will  with  his 
land,  therefore  he  may  grant  the  use  of  it  for  life  or  for  a  term 
of  years  to  another  person.  Estates  ranking  next  to  estates  in 
fee  are  life  estates.  There  are  estates  in  land  which  are  limited 
by  the  life  of  some  human  being.  It  is  not  necessary  that  the 
estate  shall  last  during  the  life,  but  that  an  estate  be  created 
which  may  continue  during  that  period.  An  estate  to  a  woman 
during  her  widowhood  is  a  life  estate,  although  she  may 
remarry  and  thus  defeat  it  before  her  death. 

In  the  case  of  Warner  v.  Tanner,  38  Ohio  St.  118,  Tanner  and  one  Bartlett 
executed  an  instrument  under  seal  by  which  Tanner  leased  to  Bartlett  two 
acres  of  land  with  use  of  water  and  the  privilege  of  conducting  it  to  a  cheese 
house  to  be  erected  by  Bartlett.  Bartlett  agreed  to  pay  $30  per  year  for  the 
premises  while  he  should  use  them  for  the  manufacture  of  cheese,  and  when 
the  premises  were  no  longer  to  be  used  for  that  purpose,  they  were  to  revert  to 
Tanner,  Bartlett  having  the  privilege  of  removing  all  buildings  and  fixtures 
erected  by  him.  Held,  that  the  agreement  created  a  life  estate  in  Bartlett 
provided  he  continued  to  use  the  premises  for  the  manufacture  of  cheese  and 
paid  the  rent. 


294  REAL  PROPERTY 

Tenant  for  Life.  —  The  owner  of  the  life  estate,  or  the  tenant 
for  life,  as  he  is  called,  unless  restrained  in  the  grant  to  him,  may 
dispose  of  his  interest  in  the  land,  or  out  of  it  may  grant  a  less 
estate,  as  for  a  certain  number  of  years,  but  he  can  grant  to 
another  no  rights  in  the  land  that  will  extend  beyond  his  life. 
The  life  tenant  can  recover  nothing  for  the  improvement  which 
he  makes  on  the  property,  and  he  is  bound  to  make  ordinary 
repairs  at  his  own  expense. 

In  Hagan  v.  Varney,  147  III.  281,  it  was  held  that  a  life  tenant  by  placing 
permanent  improvements  upon  the  land,  however  much  they  may  enhance  the 
value  of  the  estate,  can  not  create  a  charge  for  the  moneys  thus  expended 
against  the  party  who  takes  the  next  estate  or  the  remainder.  Such  improve- 
ments are  deemed  to  have  been  made  by  the  life  tenant  for  his  own  benefit 
and  enjoyment  during  the  pendency  of  his  own  estate. 

In  re  Mary  E.  Steele,  19  N.J.  Eq.  120,  it  was  held  that  a  life  tenant  is 
bound  to  keep  the  premises  in  repair.  If  a  new  roof  is  needed,  he  must  put  it 
on,  and  if  paint  wears  off,  he  must  repaint. 

The  life  tenant  has  the  right  to  cut  timber  on  the  land  for  use 
as  fuel  and  for  the  purpose  of  repairing  the  buildings  and  build- 
ing fences. 

Elliot  V.  Smith,  2  N.H.  430,  was  an  action  against  defendant,  a  life  tenant 
of  certain  premises,  for  cutting  down  and  carrying  away  two  oak  trees.  They 
were  cut  and  sold  for  the  purpose  of  paying  for  labor  and  material  in  building 
fences  on  the  land.  Held,  that  a  tenant  for  life  may  cut  trees  for  fuel,  wood, 
and  fencing,  but  can  not  sell  wood  to  pay  for  fencing  the  land.  To  justify  the 
cutting,  the  trees  themselves  must  be  used  for  these  purposes. 

A  tenant  for  life  must  not  commit  waste,  that  is,  cause  or 
allow  any  permanent  and  material  injury  to  the  property  that 
would  affect  the  interest  of  the  owner  of  the  fee.  The  one  who 
is  entitled  to  the  property  after  the  estate  for  life  has  terminated 
has  the  right  to  have  it  come  to  him  without  being  impaired  by 
injury  to  any  part  of  the  premises. 

In  the  case  of  Proffitt  v.  Henderson,  29  Mo.  325,  David  Proffitt,  at  his 
death,  was  seized  of  a  certain  tract  of  land,  in  which  he  devised  to  his  wife  a 
life  use,  and  at  her  death  the  remainder  went  to  his  children.  The  widow 
conveyed  her  interest  to  defendant.  This  action  was  brought  by  the  children 
against  defendant  for  waste  in  cutting  and  carrying  away  timber  worth  $600. 
It  was  shown  that  the  property  was  timber  land  and  not  valuable  for  anything 


ESTATE  IN  LAND 


295 


else.  Held,  that  the  cutting  of  timber  may  be  waste,  although  necessary  to 
the  profitable  enjoyment  of  the  land,  and  although  the  land  is  valuable  for 
timber  only.  Waste  is  a  lasting  damage  to  the  reversion,  caused  by  the  de- 
struction by  the  tenant  for  life  of  such  things  on  the  land  as  are  not  included  in 
its  temporary  profits. 

The  tenant  may  continue  to  work  mines  or  take  gravel  from 
pits  that  have  been  previously  worked,  but  if  he  opens  new 
mines  or  quarries,  he  is  guilty  of  waste. 

Sayers  v.  Hoskinson,  no  Pa.  St.  473,  was  an  action  for  waste  brought 
against  life  tenants  for  mining  coal  and  quarrying  limestone.  It  was  shown 
that  the  quarries  and  mines  were  opened  and  had  been  worked  before  the  life 
estate  of  defendants  began.  Held,  that  mines  and  quarries  open  at  the  begin- 
ning of  a  life  estate  may  be  worked  by  the  life  tenant  even  until  they  are  ex- 
hausted, without  rendering  him  liable  in  damages  for  waste. 

Emblements.  —  Emblements  are  the  annual  products  of  the 
land  which  are  the  result  of  the  tenant's  labor,  and  which  he 
is  entitled  to  take  away  after  his  tenancy  has  ended.  All  grains 
and  other  products  which  are  planted  and  cultivated  by  one 
having  an  interest  of  uncertain  duration,  may  be  removed  by 
him  if  that  interest  terminates  without  his  fault  before  they  are 
harvested. 

In  Harris  v.  Frink,  49  N.Y.  24,  it  was  held  that  when,  under  a  parol  con- 
tract for  the  sale  of  land,  the  vendee,  with  the  consent  of  the  vendor,  in  pur- 
suance of  the  terms  of  the  contract,  enters  into  possession  and  puts  in  crops, 
the  fact  that  the  contract  to  sell  is  invalid  does  not  affect  the  title  of  the  vendee 
to  the  crops,  and  if  the  vendor  refuses  to  perform  the  contract  and  ejects  the 
vendee,  the  latter  does  not  lose  his  title  to  the  crops. 

Therefore,  the  representative  of  a  tenant  for  life  is  entitled  to 
emblements,  since  the  tenant's  estate  is  of  uncertain  duration. 

In  Bradley  v.  Bailey,  56  Conn.  374,  it  was  held  that  the  executor  of  a 
tenant  for  life  is  entitled  to  crops  sown  during  the  tenant's  lifetime  but  maturing 
after  his  death.  It  does  not  affect  this  right  that  the  life  tenant  was  rapidly 
failing  in  health  and  had  reason  to  expect  his  early  death  when  the  land  was 
sown. 

If  the  life  tenant  terminates  the  estate  by  his  own  act,  he  can 
not  claim  emblements. 

Debow  V.  Colfax,  10  N.J.  L.  128,  was  a  case  in  which  a  minister  of  a  certain 
churgh  was  entitled  to  the  possession  of  the  parsonage  land,  and  while  in 


296  REAL  PROPERTY 

possession  he  sowed  the  land  with  grain.  He  sold  the  crop  to  B,  before  it  was 
harvested  and  voluntarily  ceased  to  be  minister  of  that  church,  removing 
to  another  charge.  Held,  that  B  could  not  claim  the  grain.  If  a  person 
has  an  estate  in  land,  the  duration  of  which  is  uncertain  and  may  continue 
until  the  grain  is  ripe,  he  will,  if  he  sowed  the  land,  be  permitted  to  reap  the 
grain,  although  the  estate  is  previously  ended,  unless  the  estate  be  terminated 
by  the  act  of  the  tenant  himself  before  the  crop  is  harvested. 

3.    ESTATES  BY  MARRIAGE 

Classification.  —  Estates  by  marriage  may  now  be  included 
under  the  three  heads  of  Curtesy,  Dower,  and  Homestead.  Un- 
der the  common  law  there  existed  an  estate  during  coverture, 
or  during  marriage,  but  this  has  been  practically  abolished  by 
statute  in  all  of  the  states.  The  estate  during  coverture  arose 
from  the  common  law  disability  of  a  married  woman  to  hold 
property;  therefore  the  husband  acquired  an  interest  in  all  of 
the  wife's  real  property,  which  gave  him  a  right  to  the  use  and 
profits  of  it  until  the  marriage  was  terminated  by  death  or 
divorce.  If  the  wife  died  first,  her  real  property  at  once 
descended  to  her  heirs,  unless  a  child  was  born  of  their  marriage, 
in  which  case  the  husband  was  entitled  to  curtesy. 

Curtesy.  —  Curtesy  is  the  estate  for  life  of  the  husband  in  the 
real  estate  of  his  wife.  Under  the  common  law  such  an  estate 
was  created,  when  there  existed  a  valid  marriage,  if  the  wife  died 
before  the  husband  and  a  child  had  been  born  which  might  have 
inherited  the  property.  These  conditions  existing,  the  husband 
had  a  life  estate  for  the  remainder  of  his  life  in  the  real  property 
of  which  the  wife  died  possessed.  It  was  not  necessary  that  the 
child  should  live  until  the  mother's  death ;  if  it  lived  but  a  mo- 
ment after  birth,  it  was  suflEicient  to  vest  this  estate  in  the  hus- 
band. This  estate  by  curtesy  has  been  aboHshed  by  statute  in 
some  of  the  states,  while  in  others  it  exists  only  in  case  the  wife 
dies  without  disposing  of  her  real  property  by  will,  this  being 
the  rule  in  New  York  State.  In  other  states  still  the  husband 
takes  the  same  interest  in  the  wife's  estate  as  the  wife  takes  in 
the  husband's. 

Breeding  V.  Davis,  77  Va.  639,  held,  that  by  the  common  law  a  husband  and 
wife  were  jointly  seized  of  her  real  property,  and  after  a  child  was  born  the 


ESTATES  BY  MARRIAGE 


297 


husband  had  an  interest  as  a  tenant  by  curtesy,  by  reason  of  which  after  the 
wife's  death  he  has  a  life  interest  in  said  land.  By  the  Virginia  married 
women's  act  no  interest  in  the  wife's  property  vests  in  the  husband  during 
coverture.  But,  if  a  child  is  born  and  the  husband  survives  the  wife,  he  has 
an  estate  by  curtesy  of  the  land  which  she  held  in  fee  when  she  died  and  which 
she  had  not  alienated  during  the  coverture. 

Dower.  —  Dower  is  the  provision  which  the  law  makes  for  the 
support  of  a  widow  out  of  the  lands  of  the  husband.  Under 
the  common  law  it  was  a  life  interest  in  one  third  of  the  hus- 
band's realty.  By  statute  in  a  few  of  the  states  this  has  been 
changed  to  a  life  interest  in  one  half  of  his  realty.  In  order  to 
give  rise  to  this  estate,  it  is  necessary  that  there  be  a  legal  mar- 
riage, that  the  husliand  own  the  land  during  some  time  after 
their  marriage,  and  that  the  husband  die  before  the  wife.  The 
husband  may  own  the  real  property  but  an  instant,  still  that  will 
be  sufficient  to  cause  the  wife's  right  of  dower  to  attach.  There- 
fore, if  A  buys  a  piece  of  land  of  B  to-day  and  sells  it  to  C 
to-morrow,  the  right  of  A's  wife  attaches.  But  this  is  not  so 
if  it  is  the  same  transaction,  as,  if  A  buys  ^  farm  and  gives  back 
a  purchase  money  mortgage,  the  wife  of  A  gets  a  dower  interest 
in  the  farm  subject  to  the  mortgage. 

In  King  v.  Stetson,  11  Allen  (Mass.)  407,  it  was  held  that  if,  at  the  same 
time  that  a  deed  of  land  is  received,  and  as  a  part  of  the  same  transaction,  the 
grantee  mortgages  the  land  to  a  third  party  for  the  purpose  of  procuring  money 
to  enable  himself  to  obtain  his  deed,  his  seizin  is  only  instantaneous,  and  the 
mortgage  will  bar  his  wife's  dower,  although  she  did  not  sign  it. 

Under  her  right  of  dower  the  wife  has  no  vested  interest  until 
the  husband  dies.  He  may  sell  the  land  without  her  consent,  and 
she  will  have  no  right  in  it  until  his  death ;  but  after  that  event, 
into  whatever  hands  it  comes  the  wife  can  claim  her  interest. 
Therefore,  if  one  takes  land  from  a  married  man,  the  wife  must 
join  in  the  conveyance  in  order  to  cut  off  her  right  of  dower. 
But  the  wife  can  not  release  her  dower  interest  to  her  husband 
nor  to  any  one  else  except  the  person  to  whom  the  land  is 
conveyed. 

In  re  Rausch,  35  Minn.  291,  we  have  a  case  in  which  Maria  Rausch,  by  an 
instrument  in  writing  which  recited  that,  in  consideration  of  the  sum  of  $100 
to  her  paid  by  her  husband,  Henry  Rausch,  and  the  further  sum  of  $300 


298  REAL  PROPERTY 

agreed  to  be  paid  to  her  by  hira  in  two  years,  she  did  "  Remise,  release,  con- 
vey, and  set  over  unto  the  said  Henry  Rausch  "  all  her  estate  or  claim  to  ali 
real  and  personal  property  now  owned  or  hereafter  acquired  by  said  Henry 
Rausch.  She  further  agreed  to  make  no  claim  on  him  or  his  heirs  for  any 
further  interest  in  his  property.  At  his  death  she  applied  for  her  dower 
interest.  Held,  that  she  could  recover.  A  married  woman  can  not  so  release 
to  her  husband  her  contingent  interest  in  his  real  property  as  to  exclude  her, 
as  his  widow,  from  dower. 

Statutes  in  many  of  the  states  have  changed  the  law  as  to 
dower.  In  a  few  of  the  states  the  wife  is  not  required  to  join 
in  a  conveyance  with  her  husband,  as  she  takes  dower  only  in 
the  property  of  which  he  dies  possessed. 

Homestead.  —  Homestead  right  is  an  exemption  of  certain 
property  from  sale  for  debts,  generally  the  home  and  a  certain 
number  of  acres  of  ground  or  land  of  a  given  value.  Under 
the  common  law  there  was  no  such  provision,  but  statutes  have 
been  passed  in  many  of  the  states  creating  a  homestead  law. 
These  statutes  vary  in  the  different  states,  and  grant  the  exemp- 
tion only  to  the  head  of  a  family  or  one  upon  whom  there  rests 
the  duty  to  support  dependent  persons  living  with  him.  A  hus- 
band and  wife  constitute  such  a  family.     (See  Appendix,  p.  359.) 

Powers  V.  Sample,  72  Miss.  187,  held,  that  an  aged  widower  living  with  a 
married  son  in  a  house  built  and  controlled  by  the  son,  though  on  the  land  of 
the  father  who  receives  no  rent  for  it,  but  who  contributes  nothing  to  the  sup- 
port of  the  family  beyond  what  is  necessary  for  his  own  maintenance,  and  who 
is  under  no  moral  or  legal  duty  to  contribute  to  the  support  of  the  family,  is 
neither  a  householder  nor  the  head  of  a  family,  so  is  not  entitled  to  homestead 
exemptions. 

Marsh  v.  Lazenby,  41  Ga.  153,  held,  that  an  unmarried  man  whose  indigent 
mother  and  sisters  live  with  him  and  are  supported  by  him  is  the  head  of  a 
family  in  the  sense  in  which  the  term  is  used  by  the  state  constitution,  and  is 
entitled  to  a  homestead. 

This  homestead  exemption  is  acquired  by  occupancy  of  the 
premises  as  a  home.  In  some  states  there  must  be  recorded  a 
notice  that  the  premises  are  claimed  as  a  homestead. 

Estate  for  years  is  an  estate  in  real  property  less  than  a  life 
estate.  The  tenant  for  years  is  called  the  lessee  or  tenant,  and 
the  owner,  the  lessor  or  landlord.  This  estate  will  be  treated 
under  the  chapter  on  Landlord  and  Tenant. 


SALE  AND  CONVEYANCE  OF  REAL  ESTATE         299 

Equitable  Estates  —  The  estates  which  we  have  been  discuss- 
ing are  termed  legal  estates.  There  also  exist  equitable  estates ; 
that  is,  the  legal  title  may  be  in  one  party,  while  the  equitable 
title  is  in  another.  Property  may  be  conveyed  to  A  to  hold  in 
trust,  or  as  trustee,  for  the  benefit  and  use  of  B.  A  is  the  legal 
owner,  but  holds  the  property  only  for  the  purpose  of  turning 
over  the  profits  to  B,  who  is  the  equitable  owner.  In  this  case, 
A  is  the  Trustee  and  B  is  the  beneficiary. 

Estat-is  in  Severalty  and  Joint  Estates.  —  Estates  are  divided, 
according  to  the  number  of  owners,  into  estates  in  severalty  and 
joint  estates,  estates  in  severalty  being  those  in  which  the  own- 
ership is  in  one  person.  Joint  estates  are  those  which  are 
owned  by  two  or  more  persons.  The  common  classes  of  joint 
estates  are  joint  tenancies  and  tenancies  in  common.  The  chief 
distinction  between  the  two  is,  that  in  the  case  of  a  joint  ten- 
ancy, upon  the  death  of  one  of  the  joint  tenants  his  interest 
vests  in  the  survivor  or  survivors,  while  upon  the  death  of  a 
tenant  in  common  his  interest  passes  to  his  representatives. 
In  the  United  States,  all  joint  estates  are  presumed  to  be 
tenancies  in  common,  unless  it  appears  that  there  was  a 
contrary  intention. 

4.    SALE  AND   CONVEYANCE  OF  REAL  ESTATE 

Title. — The  title  to  real  property  is  the  means  by  which  the 
ownership  is  acquired  and  held.  It  is,  in  other  words,  the  evi- 
dence which  a  person  has  of  the  right  to  the  possession  of 
property.  It  may  be  either  by  descent  or  purchase.  The  title 
by  descent  is  acquired  either  by  will  or  by  the  law  of  descent, 
controlling  the  disposition  of  the  real  property  of  a  person  dying 
without  a  will.  Purchase  includes  all  other  means  of  acquiring 
the  title  to  real  property,  whether  by  gift  or  for  a  valuable 
consideration. 

Land  Contract.  —  When  the  title  is  acquired  by  purchase,  the 
transaction  is  the  result  of  a  contract  or  an  agreement  of  one 
party  to  purchase  or  take  the  property  upon  the  prescribed 
terms,  and  of  the  owner  to  sell  and  convey  the  particular  prop- 


300  REAL  PROPERTY 

erty  for  the  stated  consideration.  This  agreement  is  often 
called  a  land  contract,  and  is  required  by  the  fourth  section  of 
the  statute  of  frauds  to  be  in  writing.  It  must  be  remembered 
that  this  contract  does  not  convey  the  land,  but  agrees  to  con- 
vey at  some  future  time.  If  the  conveyance  immediately 
follows  the  making  of  the  agreement,  the  contract  to  convey  is 
unnecessary,  but  in  the  passing  of  the  title  to  real  property  much 
care  is  necessary  to  ascertain  that  the  title  to  the  person  about 
to  sell,  or  the  grantor,  is  clear;  that  is,  that  no  third  party  or 
parties  have  any  claims  on  it.  To  ascertain  that  the  title  is 
clear,  a  search  of  the  records  in  the  public  office  where  all 
deeds,  mortgages,  and  other  important  documents  are  kept,  is 
made,  generally  by  a  lawyer,  or  by  some  officer  or  company 
accustomed  to  perform  such  duties.  When  the  results  of  this 
search  are  put  in  writing,  the  document  shows  all  of  the  trans- 
actions affecting  the  particular  piece  of  land,  and  is  called  an 
abstract  of  title.  It  requires  some  time  to  obtain  this  abstract 
of  title  and  to  perfect  other  arrangements  for  the  conveyance 
of  the  property,  and  the  land  contract  binds  the  parties  to 
their  agreement  during  this  interval.  Sometimes  the  pur- 
chaser has  not  the  ready  money  to  pay  for  the  property,  and 
in  such  a  case  this  contract  is  given  until  he  has  paid  a  cer- 
tain amount  by  installments,  at  which  time  a  deed  will  be 
given  him. 

A  land  contract,  used  in  New  York  State,  is  usually  in  some 
such  form  as  the  one  shown  on  the  two  following  pages.  The 
acknowledgment  which  would  be  used  with  this  contract,  and 
which  is  generally  used  with  real  property  conveyances,  is  simi- 
lar to  the  form  given  on  page  98. 

If,  in  the  above  case,  the  purchaser  had  not  had  the  money  to 
pay  down,  the  contract  might  have  provided  that  he  was  to  have 
possession  upon  the  execution  of  the  contract,  and  that  he  would 
pay  $200  a  year  for  five  years,  at  the  expiration  of  which  time 
Drake  would  give  him  a  deed,  the  balance  of  the  purchase  price 
being  secured  as  provided  in  the  above  contract.  This  con- 
tract may  assume  a  variety  of  forms,  the  object  being  to  set  forth 
the  actual  agreement  of  the  parties. 


SALE  AND   CONVEYANCE  OF  REAL  ESTATE         30I 

/ClWVCClTlCnit    Mac/<s  Me       first  «a!^  ^September 

m  ^Ae  ^eal  one  /Aoiidane/  nine  Aam/ie</  and     five  3BCtWCCtt 

Charles  A,  Drake,    of  Geneva,  Ontario  County,  New  York 
/lath     </Ue/tl6^/mi^,  anc/       Edward  Slnunons,  of  Rochester,  Monroe 

County,  New  York 
/tai^y  ef  Me  decoma ^i/j  m  tnannei  j4>AuMO€mf :     Wne6am/iaUy  c/Me 
^u^ ^al/j  m  coniiaela/Mn  c/Me  dum.  c^ 

Two       Thousand       (2,  000)  "S^oMiU, 

^  /e  ^{t/^y  /lat'i/ ad  Aeteena^ei  tnen^icnea,  nele^  aatees  /o  d«Mun/o  Me  iate/ 
^t/y    c/ Me  decern/ /lal^,  Hll     that  TRACT  or  PARCEL  of  LAND,   situ- 
ate In  the  City  of  Rochester,   County  of  Monroe  and  State  of  New 
York,   and  more  particularly  distinguished  as  lot  number  twenty(20) 
as  laid  down  on    a  map  of  Snyder  &  Stone's  suhdivision  of  a  part 
of  the  Strong  Tract  on  file  In  Monroe  County  Clerk's  office  in 
liter  5  of  maps  at  page  83;  said  lot  nximher  twenty  (20)     being 
situate  on  the  east  side  of  Kenmore  Street,   and  being  thirty- three 
(33)   feet   in  width,   front   and   rear,   and  one  hundred  and  fifty-nine 
(159)   feet  deep. 

HnZ)  tbC  ZZSb  Aatey  {^  Me  Jeeon/Aai^  Aele/y  a^iee%     i>  AulcAa^  Muf 
^iemiMd  ai  Me  4iaea  oofitfuuia&'cm  0/ 
Two  Thousand     (2,000)  '^oMu^j  an/ lo  Aay  Me  Mme  aj  ^/)/oiM . 

One  Thousand      (1,000)  Dollars  upon  the  execution  of  the  con- 
veyance to  second  party  within  thirty  days  from  the   date 
hereof  and  the  balance  two  years  thereafter  secured  by  a 
mortgage  on  the   above  described  premises  for  the  sum  of  one 
thousand   (1,000)  Dollars. 

iclno  tbC  B^lo  ^a^/y     a^Me/w/AaW,  on  teceiWna  <Utc4  Aaymen/  a,n^ 

on  the  execution  of  the  mortgage  by  the  party  of  the  second  part 
(?/  Me  /('me  an/ en  Me  mannei  a/(^ve  men/thne/  Ma//,  ath^&oton  At^^ei  cMi) 
an/  ex/ien^,  exeat/e,  ac4now/u^  an/ /e/evei,  oi  cau^  /o  /e  txceeu/e/  aMnou/ 
ee^e/ an/ /Mvete/ /o  Me  4ae/^al/y  a/ Me  sea>n/^al/,  oi  fy\,x5  aMeanJ.  a 
^t^et  /re/ am/ae'nen^  a  ^eneia/  wattan/^  aft/ /Ae  a^a/ At// owenanAi /in  Me 


302  REAL  PROPERTY 

conveueha  a^i</ euidalma  lo  Mem  ^<f  *a?  ^hi^te  o/Zne  4ae</ /ilemtdtA, 

Aee  Ac/n  a//  encum^uznoe  t 

toAtcA  "Sifeei/ iiAa//  cot^M>^fn  ^  Me  ieaealetnen^  c/  Me  ^nbeaZ  ^u^iel^y, 
.^aw  c/Me  S^a/e  €^ ,^^to   '^oi4,  le^/tna-^  dAoi/ ^tm4  o/  '^€€<A,  a4 
^l  ad  ^Ae  datne  {4  oAA/tcoMe  Mele/Oj   ■u^necn   ^eea  6naf/  ce  Jeuifeiea  on 
Me    first     <:^yc/    October     /^C^     a^  1.0  o'cu>c4  k^^,  a/    the 
Merchants  National  Bank,   Rochester,  New  York.  — 

Hn&  it  18  "mnbCtStOOb  Ma/  /Ae  <l/iYiu/€i/Mnd  aj/^i€dae'(/  aie  la  aM/u 
/c  anc/  Mna  Me  netU,  eccecu/cidj  aamtncdAa/oH  ana  a<i<i(atH  c/^  Me  le^ 
4./iec/tve  /lal/ceA. 

Hn  "diQlitnCdS  WbCrCOt  Me  /uu/ied  /o  /Ae^e  /nedenAl  Aave  Aeiean^  4el 
/Acn  AantAl  ant/ deoAi  /Ae  mty  ana  yeai  Mid/  amtie  tou/Zen. 
Sealed  and  delivered  »n  the  presence  of 


^^^^^?^S^.e.^|fc 


5.    DEEDS 

Definition.  —  The  conveyance  of  the  title  to  the  property  may 
be  absolute,  in  which  case  it  is  made  by  deed,  or  conditional,  in 
which  event  it  is  made  by  mortgage. 

A  deed,  in  real  property  law,  is  defined  as  a  written  contract, 
signed,  sealed,  and  delivered,  by  means  of  which  one  party  con- 
veys real  property  to  another.  The  two  principal  kinds  of 
deeds  are  warranty  and  quitclaim.  The  warranty  deeds  are 
conveyances  which,  aside  from  granting  the  land,  contain  cer- 
tain warrants  or  covenants  concerning  the  title.  A  quitclaim  deed 
merely  grants  what  interest  the  grantor  has  and  nothing  more. 

A  form  of  warranty  deed  used  in  New  York  State  is  shown 
on  the  following  page.  (Acknowledgment  in  the  same  form  as 
that  given  on  page  98.) 


DEEDS  ^   '  2Q2 


W^vh  %jd.m\mt, 


made  the      fifteenth  dag 

of     September   in  the  i/ear  nineteen  hundred      and   five 

Setween      Charles  A.  Drake,  unmarried,   of  Geneva,  Ontario  county, 

New  York,  party  of  tlie  first  part,   and  Edward  Simmons,   of 

Rochester,  Monroe  County,   New  York,  party       ff the $eeond part. 

TISUtnCSSCtb,  That  the  tald  party  ef  the  first  part,  in  censideratien  of        the   sum    of 

two         thousand       (2,000)  dollars,  lawful  money 

of  the  United  States,  paid  by  the  party  of  the  second  part,  doQB  hereby  grant  and  release 

unto  the  said  party         of  the  second  part,     — ^     his    ^^^—     heirs  and  assigns  for  ever, 

BIl  that  Tract  or  Parcel  of  land  situate  In  the  City  of  Rochester, 
County  of  Monroe,  and  State  of  New  York,  and  more  particularly 
distinguished  as  lot  number  twenty  (20),  as  laid  down  on  a  map 
of  Snyder  &  Stone's  subdivision  of  a  part  of  the  Strong  Tract 
on  file  In  Monroe  County  Clerk's  Office  in  Liber  5  of  Maps  at 
page  83.  Said  lot  number  twenty  (20)  is  situate  on  the  east 
side  of  Kenmore  Street,   and  is  thirty- three   (33)  feet  in  width, 

front  and  rear,   and  one  hundred  and  fifty-nine   (159)  feet  deep 

COdCtbcr  with  the  appurtenances  and  all  the  estate  and  rights  of  the  part  y        of  the  first 

part  in,  and  to  said  premises, 

VO  IbSVC  anb  to  1bOl&  the  aoove  granted  premises  unto  the  said  party     of  the  second  part, 

his  heirs          and  assigns  forever, 
^tib  the  said       Charles  A.   Drake,—— _^ 


part  y     of  tlie  first  part,  do  es      covenant  unth  said  part  y         of  the  second  part  as  fdUowS} 

Jflret.    That  the  said     Charles  A.   Drake, — — 

part  y  of  the  first  part,  i  seized  of  the  said  premises  in  fee  simple  and  haS   good  right  to  coiivej^ 
the  same. 

SeCOn&.     That  the  part  y      of  the  second  paH  shall  quietly  enjoy  the  said  premises, 

ttbirt).     That  tlie  said  premises  are  free  from  incumbrances. 

JOUrtb.       That  the  paHy        of  the  first  part  will  execute  or  procure  any  further  necessary 
assurance  of  the  title  to  said  primises. 

Jlftb,    That  the  said      Charles  A.  Drake, ^ — . 

part  y     of  the  first  part,  will  forever  warrant  the  title  to  said  premises. 

In  MltneSB  MberCOf,  the  said  pan  y     of  the  first  pan  hoB       hereunto  set    hlB 
h<ind     and  seal     the  day  and  year  first  above  written. 
In,  presence  of 


o/^^c^^ 


304  ^  REAL  PROPERTY 

Conditions.  —  All  deeds  must  be  in  writing  (or  printing),  and 
must  have  parties  competent  to  contract.  To  constitute  a  valid 
deed,  or  conveyance  of  property,  it  is  also  requisite  that  there 
be  (i)  property  to  be  conveyed,  (2)  words  of  conveyance, 
(3)  description  of  the  property,  (4)  a  writing  signed,  and  in 
some  states  sealed,  by  the  grantor,  (5)  delivery  and  acceptance, 
(6)  acknowledgment  in  some  states,  witnesses  in  others,  and  in 
still  other  states  the  instrument  must  be  registered. 

Property  to  be  Conveyed.  —  The  first  condition  is  self-evident, 
as  a  valid  deed  can  not  be  given  unless  there  is  real  property  to 
convey. 

Words  of  Conveyance.  —  The  deed  must  contain  words  of  con- 
veyance, called  the  granting  clause,  which  consists  of  words 
sufficient  to  transfer  the  estate  to  the  grantee.  In  the  above 
deed  the  words,  "  Do  hereby  grant,  sell,  and  convey,"  constitute 
this  clause.  The  words  "  give,  grant,  bargain,  and  sell "  are 
sometimes  used,  or  again  the  phrase,  "grant,  bargain,  sell, 
remise,  release,  convey,  alien,  and  confirm." 

Humtnehnan  v.  Mounts,  87  Ind.  178,  held,  that  a  writing  as  follows,  "This 
indenture  witnesseth,  that  I,  Jacob  Smith,  warrant  and  defend  unto  Christena 
Smith,  her  heirs  and  assigns  forever,"  certain  real  estate  that  was  then  de- 
scribed, the  instrument  being  then  signed,  sealed,  and  acknowledged  like  a 
deed,  was  not  effective  as  a  conveyance,  as  it  contained  no  granting  clause, 
nor  words  signifying  a  grant. 

The  granting  clause  should  contain  the  names  of  the  parties, 
also  the  words  defining  the  estate,  as  in  the  above  deed,  "  unto 
the  said  party  of  the  second  part  his  heirs  and  assigns  forever." 
By  the  clause  used  in  this  case  an  estate  in  fee  is  granted.  Under 
the  common  law,  if  the  word  "  heir  "  was  omitted  and  the  grant 
was  to  the  grantee  alone,  only  a  life  interest  would  be  conveyed. 

In  Adams  v.  Ross,  30  N.J.  L.  505,  it  was  held  that  a  grant  to  A  for  her 
natural  life  and  at  her  death  to  her  children,  conveyed  a  life  estate  to  A  and 
then  an  estate  to  her  children  during  their  lives,  but  that  they  did  not  take  it 
in  fee,  as  the  grant  contained  no  words  of  inheritance. 

Sedgwick  V.  Laflin,  10  Allen  (Mass.)  430,  held,  that  a  grant  to  A  and  "his 
successors  and  assigns  forever,"  conveyed  only  a  life  estate.  The  court  said 
that  it  is  a  well-settled  rule  of  the  common  law  that  the  word  "  heirs  "  is  neces- 
sary to  create  an  estate  of  inheritance. 


DEEDS 


305 


But  this  rule  has  been  changed  by  statute  in  some  of  the  states, 
and  a  conveyance  showing  an  intent  to  grant  a  fee  will  be  so 
construed. 

The  conveyance  clause  may  contain  exceptions  ;  that  is,  there 
may  be  reserved  something  that  would  otherwise  pass  with  the 
property  conveyed.  The  exception,  for  instance,  might  be  of  a 
right  of  way  over  the  land,  or  the  right  to  mine  coal  or  minerals. 
The  exception  must  be  stated  and  particularly  described. 

The  habendum  is  that  part  of  the  conveying  clause  which 
begins  with  the  words  "To  have  and  to  hold."  It  designates 
the  estate  which  is  to  pass.  If  it  is  repugnant  to  the  granting 
or  conveying  clause,  it  is  void,  and  if  the  conveying  clause  de- 
fines the  estate  granted,  the  habendum  clause  is  not  necessary, 
although  it  is  usually  employed. 

Ratliffe  v.  Marrs,  87  Ky.  26,  held,  that  where  the  granting  clause  grants  an 
absolute  estate  to  A,  and  the  habendum  recites  that  a  life  estate  was  given  to 
A,  remainder  to  B,  A  takes  an  absolute  estate.  When  the  granting  clause 
and  the  habendum  do  not  agree,  the  latter  gives  way  to  the  granting  clause. 

Description. — The  deed  must  contain  a  description  of  the 
property  sufficient  to  identify  it.  The  description  may  include 
references  to  maps,  monuments,  distances,  or  boundaries. 

Travelers  Insurance  Co.  v.  Yount,  98  Ind.  454,  held,  that  a  creek  is  a  monu- 
ment which  may  be  referred  to  as  a  boundary  in  a  deed  or  mortgage. 

The  description  often  closes  with  the  words,  "  with  the  privi- 
leges and  appurtenances  thereto  belonging."  But  it  is  not 
considered  that  this  clause  adds  anything  to  the  deed.  The 
appurtenances  are  such  rights  as  watercourses,  rights  of  way, 
rights  to  light  and  air,  etc.,  and  these  are  all  included  in  the 
general  grant,  unless  they  are  expressly  reserved. 

Signature  and  Seal.  —  At  common  law  a  seal  was  necessary 
to  the  legality  of  a  deed,  but  in  many  states  this  requirement  has 
been  abolished.  Between  the  parties  themselves  to  a  deed  a 
consideration  is  not  necessary  to  its  validity,  although  it  may 
in  some  cases  be  attacked  by  creditors  of  the  grantor.  A  date 
is  not  strictly  necessary  to  the  validity  of  a  deed,  and  when  used 
may  be  placed  in  any  part  of  the  instrument.  It  is  generally  at 
the  commencement  or  just  before  the  signature  at  the  end.     A 

COM.   TAW — 20 


306  JiEAL  PROPERTY 

deed  takes  effect  from  the  time  of  delivery,  and  the  presumption 
is  that  the  date  of  delivery  is  the  date  of  the  instrument. 

It  is  usual  for  the  deed  to  close  with  the  testimonium  clause, 
which  recites,  "  In  witness  whereof  the  party  of  the  first  part 
has  hereunto  set  his  hand  and  seal  the  day  and  year  first  above 
written,"  and  immediately  thereafter  the  grantor  signs  his  name. 
By  the  statute  of  frauds  the  deed  is  required  to  be  signed.  In 
some  states  the  statutes  require  that  the  deed  be  subscribed,  and 
in  that  case  it  must  be  signed  at  the  end,  otherwise  it  may  be 
signed  at  any  other  place. 

In  Devereux  v.  McMahon,  io8  N.C.  134,  it  was  held  that  while  the  laws  of 
North  Carolina  require  all  deeds  conveying  land  to  be  signed  by  the  maker, 
the  signing  is  not  necessarily  required  to  be  at  the  end  of  the  deed.  If  the 
signature  is  in  the  body  of  the  instrument,  it  is  sufficient.  Nor  is  it.  essential 
that  the  maker  should  actually  sign  his  name.  He  may  authorize  another  to 
do  it  in  his  presence,  or  he  may  affix  his  mark,  which  will  have  the  same  effect 
as  his  own  writing. 

Delivery  and  Acceptance.  —  A  deed  does  not  become  opera« 
tive  until  it  is  delivered  and  accepted  ;  that  is,  the  instrument 
must  pass  out  of  the  control  of  the  grantor,  but  it  must  be  his 
voluntary  act,  and  if  taken  without  his  consent,  as  by  theft,  it:  is 
not  a  delivery. 

In  the  case  oi  Fisher  v.  Hall,  41  N.Y.  416,  a  conveyance  ot  real  property 
had  been  subscribed  and  sealed  by  the  grantor  and  attested  by  witnesses 
under  a  clause  stating  that  it  had  been  sealed  and  delivered  in  their  presence, 
but  the  grantee  was  not  then  present,  and  remained  ignorant  of  the  deed  until 
long  after  the  death  of  the  grantor,  who  continually  retained  the  deed  in  his 
possession  until  his  death.  It  was  held  that  such  a  conveyance  did  not  pass 
title  to  the  grantee,  as  there  was  no  delivery  to  him.  The  court  further  held 
that  it  is  not  necessary  for  the  grantee  to  be  present  at  the  signing  of  the  deed, 
or  that  he  should  have  actual  possession  of  it,  but  if  he  does  not  receive  the 
deed,  it  should  be  placed  within  the  power  of  some  third  person  for  the  grantee's 
use. 

The  instrument  may  be  intrusted  to  a  third  person  to  be  deliv- 
ered to  the  grantee  on  the  performance  of  some  condition.  This 
is  termed  a  "delivery  in  escrow."  To  constitute  a  valid  delivery 
in  escrow  there  must  be  no  power  in  the  grantor  to  recall  it. 


DEED6  307 

James  v.  Vanderkeyden,  I  Paige  Ch.  (N.Y.)  385,  was  a  case  in  which  a 
mortgage  and  a  deed  were  delivered  to  a  third  person,  to  be  kept  by  him 
during  the  pleasure  of  the  parties  and  subject  to  their  further  order.  Held, 
that  the  papers  were  not  delivered  in  escrow,  such  delivery  as  in  this  case 
amounting  to  a  mere  depositary.  To  constitute  a  delivery  in  escrow  the 
papers  must  be  placed  in  the  hands  of  a  third  person,  who  is  to  deliver  to 
the  grantee  upon  the  happening  of  some  event  or  the  performance  of  some 
condition. 

Not  only  must  there  be  a  delivery,  but  there  must  be  an 
acceptance  by  the  grantee,  though  acceptance  will  sometimes 
be  presumed  from  the  grantee  having  possession  of  the  deed  or 
from  the  beneficial  character  of  the  instrument. 

Jackson  V.  Phipps,  12  Johns.  (N.Y.)  418,  held,  that  a  delivery  of  a  deed  is 
not  complete  until  it  has  been  accepted  by  the  grantee.  The  grantor  agreed 
to  give  the  grantee  a  deed  of  his  farm  as  security  for  a  debt,  and  upon 
returning  home  executed  and  acknowledged  a  deed  as  agreed,  and  left  it  in 
the  clerk's  office  to  be  recorded.  Neither  the  grantee  nor  any  person  in  his 
behalf  was  present  to  receive  it.  Held,  that  this  did  not  constitute  a  delivery 
and  acceptance. 

Acknowledgment.  —  Acknowledgment  is  necessary  to  entitle 
the  instrument  to  be  recorded  in  some  states,  and  in  other  states 
it  is  necessary  to  give  it  vahdity.  An  acknowledgment  consists 
in  the  grantor  going  before  an  officer  designated  by  law  and 
declaring  the  deed  to  be  genuine,  and  that  it  is  his  voluntary 
act,  the  officer  making  a  certificate  to  this  effect.  An  ordinary 
form  of  acknowledgment  is  shown  on  page  98. 

Blood  V.  Blood,  23  Pick.  (Mass.)  80,  held,  that  if  a  deed  of  land  be  re- 
corded without  having  been  acknowledged  before  a  magistrate,  the  record  is 
of  no  effect. 

In  some  states  one  or  more  witnesses  to  a  deed  are  required 
by  statute  in  case  there  is  no  acknowledgment  in  order  to  entitle 
it  to  be  recorded,  while  in  other  states  they  are  necessary  to 
give  it  vahdity. 

Record. — The  statutes  in  all  of  the  states  provide  for  the 
registration  or  recording  in  some  public  office  of  all  deeds  and 
other  instruments  affecting  real  property.  Instruments  so  re- 
corded are  notice  to  the  whole  world  that  they  exist,  as  every 
one  can  examine  the  records.     Therefore  the  first  instrument 


308  REAL  PROPERTY 

recorded  has  priority  over  another  like  instrument  on  the  same 
property.  But  as  between  the  parties  themselves  and  all  parties 
having  actual  notice,  the  instrument  is  in  most  of  the  states 
equally  valid  without  recording.  It  is  only  against  subsequent 
purchasers  who  buy  in  good  faith  that  unrecorded  instruments 
are  of  no  effect. 

Warranties.  —  As  we  have  said,  a  deed  may  be  a  full  warranty 
deed,  as  set  forth  on  page  303,  which  contains  the  five  cove- 
nants of  title,  or  it  may  be  a  simple  warranty  deed  containing 
only  the  covenant  of  quiet  enjoyment  and  covenant  warranting 
the  title  of  the  grantor.  Upon  a  breach  of  a  covenant  the 
grantor  is  liable  for  damages.  They  are  contracts  by  which 
the  grantor  warrants  certain  facts  to  the  grantee. 

Seizin.  —  In  the  full  warranty  deed  above  mentioned  the  first 
covenant  is  that  of  seizin  and  right  to  convey.  This  is  a  covenant 
that  the  grantor  has  possession  of  the  property  granted  and  has 
a  right  to  convey  it.  He  must  have  the  very  estate  in  quantity 
and  quality  which  the  deed  purports  to  convey.  This  covenant 
is  broken  when  the  grantor  is  not  the  sole  owner,  or  when 
the  property  is  in  the  adverse  possession  of  another,  or  when  the 
land  described  does  not  exist,  or  there  is  a  deficiency  in  the 
amount  of  land  conveyed. 

Bacon  v.  Lincoln,  4  Cush.  (Mass.)  210,  was  an  action  for  breach  of  cove- 
nant of  seizin.  The  land  conveyed  was  described  as  a  tract  of  land  in  the 
county  of  Hamilton  and  state  of  New  York,  and  known  upon  a  map  of 
township  No.  38,  filed  in  the  office  of  the  clerk  of  Montgomery  County  as 
No.  5.  On  the  trial  it  was  shown  that  there  was  no  such  map  on  file  in  the 
Montgomery  County  clerk's  office,  that  township  No.  38  had  never  been  sur- 
veyed nor  subdivided,  and  that  no  such  lot  as  the  one  described  in  the  deed 
existed.  Held,  that  this  constituted  a  breach  of  the  covenant  of  seizin.  The 
defendant  covenanted  that  he  was  seized  of  the  lot  described  in  the  deed,  and 
if  no  such  lot  existed,  the  covenant  was  broken. 

This  covenant  is  often  set  forth  in  the  deed  in  more  elaborate 
form  after  the  following  manner :  — 

"  The  party  of  the  first  part  does  hereby  covenant  and  agree 
that  at  the  time  of  the  ensealing  and  delivery  of  these  presents  he 
was  the  lawful  owner  and  was  well  seized,  in  fee  simple,  of  the 
premises  above  described,  free  and  clear  from  all  lien,  right  of 


DEEDS 


309 


dower  or  other  incumbrances  of  every  name  and  nature,  legal  or 
equitable,  and  that  he  has  good  right  and  full  power  to  convey 
the  same." 

Quiet  Enjoyment.  —  The  second  covenant  is  that  of  quiet 
enjoyment,  and  is  to  the  effect  that  the  grantee  and  his  heirs 
and  assigns  shall  not  be  legally  disturbed  in  their  quiet  and 
peaceable  possession  of  the  premises,  but  that  they  shall  pos- 
sess it  without  suit,  trouble,  or  eviction  by  the  grantor  or  his 
heirs  or  assigns. 

In  Underwood  v.  Birchard,  i^i  Vt.  305,  it  was  held  that  a  covenant  of 
quiet  enjoyment  relates  to  the  grantor's  right  to  convey  the  premises.  It  is  a 
covenant  that  the  grantee  shall  not  be  rightfully  disturbed  in  his  possession, 
and  not  that  he  shall  not  be  disturbed  at  all.  So  where  it  appears  that  the 
grantee  was  kept  out  of  possession  by  a  party  who  had  no  right  or  claim,  it  is 
not  a  breach  of  the  covenant. 

Incumbrances.  —  Number  three  is  a  covenant  against  incum- 
brances, and  warrants  that  there  are  no  outstanding  rights  in 
third  parties  to  the  land  conveyed.  It  is  a  covenant  against 
both  mortgages  and  easements  in  favor  of  third  parties.  It  is 
broken  by  an  outstanding  mortgage,  an  unexpired  lease,  an 
easement,  unpaid  taxes,  or  judgments  that  are  unsatisfied. 

Clark  v.  Fisher,  54  Kans.  403,  was  an  action  brought  for  a  breach  of  a  cov- 
enant-against  incumbrances  in  a  deed  given  by  defendant.  It  seemed  that 
one  Dent  was  a  tenant  under  a  lease  under  which  he  was  to  give  up  pos- 
session to  the  grantor  on  thirty  days'  notice  in  case  of  sale,  but  Dent  was  to 
have  the  right  to  harvest  sixty  acres  of  wheat  which  he  had  sown.  Held, 
that  this  right  to  gather  a  growing  crop  was  an  incumbrance,  and  the  amount 
of  damages  which  plaintiff  could  recover  was  the  value  of  the  crop,  less  the  cost 
of  harvesting  and  marketing.  This  case  also  held  that  an  outstanding  lease 
was  an  incumbrance.  An  incumbrance  is  defined  as  any  right  to  or  interest 
in  the  land  which  may  exist  in  a  third'  person  to  the  diminution  of  the  value 
of  the  land,  but  which  does  not  prevent  the  passing  of  the  fee  by  conveyance. 

Hall  V.  Dean,  13  Johns.  (N.Y.)  105,  held,  that  a  judgment  against  the 
grantor,  outstanding  at  the  time  of  the  execution  of  a  deed,  is  a  breach  of 
the  covenant  against  incumbr9.nce. 

In  Hill  V.  Bacon,  no  Mass.  387,  it  was  held  that  taxes  assessed  to  the 
grantor  on  the  land  conveyed,  before  the  execution  of  the  deed  and  which  are 
not  paid  by  the  grantor,  constitute  a  breach  of  the  covenant  against  incum- 
brances. 


310  REAL  PROPERTY 

Further  Assurance.  —  The  fourth  covenant  is  one  of  further 
assurance,  and  is  an  agreement  by  the  grantor  to  perform  any 
acts  that  may  be  necessary  to  perfect  the  grantee's  title,  includ- 
ing the  execution  of  such  further  instruments  as  may  be  required 
for  this  purpose. 

In  Colby  v.  Osgood,  29  Barb.  (N.Y.)  339,  it  was  held  that  the  release  of  a 
mortgage  is  a  further  assurance,  and  an  action  may  be  brought  for  the  breach  of 
this  covenant  if  the  grantor  refuses  to  clear  the  title  to  the  premises  by  obtain- 
ing such  a  release,  unless  the  property  was  expressly  conveyed  subject  to  the 
mortgage. 

Warranty  of  Title.  —  The  fifth  and  last  covenant  is  the  war- 
ranty of  title,  which  is  an  assurance  by  the  grantor  that  thQ  grantee 
shall  not  be  evicted  from  part  or  all  of  the  premises  by  reason 
of  a  superior  title  in  any  one  else.  This  covenant  is  broken  by 
an  eviction  from  any  or  all  of  the  premises,  the  removal  of 
fixtures  by  one  having  a  right  to  do  so,  or  the  taking  of  the 
premises  by  one  having  a  paramount  title. 

Norton  v.  Jackson,  5  Cal.  262,  held,  that  eviction  by  process  of  law  is  re- 
quired to  enable  one  to  maintain  an  action  for  breach  of  covenant  of  warranty. 

Quitclaim  Deed.  —  The  quitclaim  deed,  mentioned  on  page 
302,  is  drawn  in  New  York  State  in  the  form  shown  on  the  fol- 
lowing page. 

The  quitclaim  deed  contains  none  of  the  covenants  of  a  war- 
ranty deed,  and  purports  to  grant  only  what  interest  the  grantor 
has,  if  he  has  any.  The  quitclaim  deed  does  not  even  aver  that 
he  has  any  title.  If  he  has  a  defective  title,  the  grantee  has  no 
claim  on  him.  The  words  of  conveyance  differ  from  those  in 
the  warranty  deed.  This  form  of  deed  is  used  when  the  grantor 
has  an  interest  in  land,  as  one  of  several  heirs  or  as  a  joint 
owner,  and  wishes  to  convey  his  share  to  another  heir  or  to  the 
other  joint  owner.  It  is  also  employed  when  a  person  having 
an  easement  or  other  minor  estate  in  land  wishes  to  transfer  his 
estate  to  the  owner  in  fee  for  the  purpose  of  clearing  the  title. 

Covenant  against  Grantor.  —  The  covenant  against  the  grantor 
is  the  only  covenant  used  in  a  quitclaim  deed.  It  is  also  some- 
times used  in  a  warranty  deed,  when  the  grantor  is  not  willing 


DEEDS 


311 


is  In!rtitturt, 


of  —      October 


mad*  th*        fifteenth 

in  the  year      19        hundred  and    '5     


day 


^ttWtttt     Charles   Simmons   and  Sarah  his   wife,    of  Rochester,  . 
Monroe  County,  New  York,  parties  of  the  first  part,    and  Thomas 


B.    Curtis,   of  the  same  place,  party 


of  the  second  part. 


^ttO^^b,    ^n^t  *f^  ««"^  parAeaof  the  first  paH,  in  consideration  of    the    Slim    of 

two    thousand       (2,000)  dollars,  lawful  numey 

of  the  United  States,  paid  hy  the  party     of  the  second  part,  do         hereby  remise,  release  and 
quU-claim  unto  the  said  part  y     of  the  second  paH  his  ^irs  and  assigns  forever, 

9klt     that  Tract  or  Parcel  of  Land,    situate  in  the  town  of 
Lansing,    County  of  Tompkins,   and  State  of  New  York,  heing  a  part 
of  lot  numher  forty-nine   (49)   in  said  town,   and  hounded  and  de- 
scribed as  follows,    to  wit:  -     Beginning  at    the  southeast 
comer  of  land  owned  hy  John  T.  Reynolds  and  mnning  thence 
north  one  hundred  and  twenty-six  and  one  half   (126  l/2)   rods; 
thence  east  to  the  east  line  of  said  lot  number  forty-nine   (49); 
thence  south  to  land  owned  by  Chauncey  R.Brown;   th«nce  west  to 
the  northeast  comer  of  land  owned  by  Brown;  thenee^south  to 
the  center  of  the  highway;  aad  thence  west  to  the  place  of  be- 
ginning,  containing  one 'hundred  and  three  (103)  acres  of  land, 
more  or  less. 

^Og(tIlC(  vaUh  fne  appurtenaneet  and  aO.  HKt.eilaie  and  rigkU  of  tKe  paftiea  of  Ou.  ftrtt  paH 

in  and  to  said  premises. 

S0  ^ZVt  Attd  to  pOlA  «*«  above  mentUmed  and  described  premises  unto  theMOd  party 

of  the  second  part,      —     his      •    *«»'■«  and  assigns  for  ever. 

§tt  WAnm  WmtOtf  the  said  partleaof  the  first  part  hOTQ  hereunto  set    their 
hand&and  seals  the  day  and  year  first  above  written. 


In  Presence  of 


}jUuMuriA4^^Kk 


312  REAL  PROPERTY 

to  warrant  the  title  absolutely,  but  is  willing  to  covenant  that 
he  has  not  himself  done  or  permitted  to  be  done  anything  that 
would  injuriously  affect  the  title  to  the  premises.  Such  a  deed  is 
called  a  special  warranty  deed.  The  form  of  this  covenant  as 
used  in  New  York  State  is  as  follows :  "  The  said  party  of  the 
first  part  covenants  with  said  party  of  the  second  part  that  the 
party  of  the  first  part  has  not  done  or  suffered  anything  whereby 
the  said  premises  have  been  incumbered  in  any  way  whatever." 

In  Bucknerv.  Street,  15  Fed.  Rep.  (U.S.)  365,  it  was  held  that  a  deed  with  a 
special  warranty  against  all  persons  claiming  by,  through,  or  under  the  grantor, 
can  not  be  extended  to  a  general  covenant  of  warranty  against  all  persons. 

6.    MORTGAGES 

Definition.  —  A  mortgage  is  a  conveyance  of  land  as  security 
for  a  debt  or  some  other  obligation,  subject  to  the  condition 
that  upon  the  payment  of  the  debt  or  the  performance  of  thj 
obUgation  the  conveyance  becomes  void.  The  debtor,  or  the 
person  who  gives  the  mortgage,  is  called  the  mortgagor  and 
the  creditor,  or  the  person  to  whom  it  is  given,  is  the  mortgagee. 

Equity  of  Redemption.  —  Under  the  common  law  the  mortgage 
was  strictly  a  conveyance,  and  the  mortgagee  held  the  legal 
title  to  the  property.  His  title  was  subject  to  be  defeated  upon 
the  payment  of  the  debt  secured,  and  in  default  of  the  payment 
his  estate  became  absolute.  This  often  led  to  hardship  and 
injustice,  for  the  value  of  the  property  might  be  greatly  in  excess 
of  the  mortgage  debt.  The  courts  of  equity  recognized  this 
injustice  and  extended  relief  by  giving  the  mortgagor  the  right 
to  redeem  the  land  by  paying  the  debt  with  interest.  This 
right  was  termed  an  "  equity  of  redemption,"  and  to  cut  off  such 
right  an  action  was  brought  in  court  giving  the  mortgagor  a 
certain  time  in  which  to  pay  or  else  lose  the  right  entirely. 

Lien.  —  Now,  in  many  of  the  states,  the  mortgage  is  looked 
upon  as  a  lien  which  the  mortgagee  has  in  the  mortgaged  prem- 
ises, the  mortgagor  still  being  the  legal  owner  subject  to  the 
lien  which  the  mortgagee  holds  upon  the  land  as  security  for 
his  debt. 


MORTGAGES 


313 


In  Dutton  v.  Warschauer,  21  Cal.  609,  it  was  held  that  the  doctrine  respect- 
ing mortgages  which  prevails  in  the  state  of  California  is  that  a  mortgage  is 
a  mere  security  operating  upon  the  property  as  a  lien  or  incumbrance  only, 
and  is  not  a  conveyance  vesting  in  the  mortgagee  any  estate  in  the  land. 

Any  Interest  in  Realty  which  is  Subject  to  Sale  may  be 
Mortgaged.  —  A  widow  may  mortgage  her  right  of  dower,  or  a 
mortgagee  may  mortgage  his  mortgage,  and  an  heir  may  mort- 
gage his  undivided  interest. 

In  the  case  oi  Neligh  v.  Michenor,  11  N.J.  Eq.  539,  A  and  B  entered  into 
a  written  contract,  by  which  B  bound  himself  to  convey  certain  lands  to  A. 
Held,  that  A  may  mortgage  his  interest  in  the  land  under  this  contract.  Every- 
thing that  is  the  subject  of  a  contract  or  that  may  be  assigned,  is  capable  of 
being  mortgaged. 

Form.  —  A  mortgage  is  in  substantially  the  same  form  as  a 
deed,  with  the  addition  of  the  defeasance  clause.  This  is  a  clause 
containing  a  statement  that  the  conveyance  is  made  conditional 
upon  the  payment  of  a  specific  amount,  which  amount  being 
paid,  the  instrument  is  void.  A  mortgage  is  executed  with  all 
of  the  formality  of,  and  in  practically  the  same  manner  as,  a 
deed.  As  a  rule,  when  the  mortgage  is  given  to  secure  a 
debt,  it  is  accompanied  by  a  note  or  bond  or  other  evidence 
of  indebtedness,  making  the  mortgagor  personally  liable,  so 
that  the  mortgagee  may  look  to  him  personally  in  case  the 
mortgaged  property  is  not  sufficient  to  pay  the  debt.  This  is 
not  necessary  to  the  validity  of  the  mortgage,  as  there  may  be 
a  valid  mortgage  without  any  personal  liability  on  the  part  of 
the  mortgagor;  for  example,  when  the  creditor's  only  right  to 
payment  is  out  of  the  mortgaged  property. 

Hodgdon  v.  Shannon,  44  N.H.  572,  held,  that  the  validity  of  a  mortgage 
depends  upon  the  genuineness  of  the  debt  described  in  the  condition  thereof. 
This  debt  need  not  exist  in  the  form  of  a  promissory  note. 

The  ordinary  form  of  a  mortgage  in  New  York  State  is  shown 
on  the  two  following  pages.     (Acknowledgment  as  on  page  98.) 

Defeasance  Clause.  —  In  the  form  of  mortgage  shown,  the 
defeasance  clause  is  that  paragraph  beginning  with  the  words 
"  Provided  Always."  No  particular  form  is  necessary  for  this 
clause.     So  long  as  it  shows  that  the  conveyance  is  made  to 


314 


HEAL  PROPERTY 


i^is  Jntetwr^t 


madsths  fifteenth  day 

of       September  in  the  year-nineUen  hundred     and   five 

SetWeCn     Edward  Simmons,  unmarried,   of  Rochester,  Monroe  County, 
New  York,  party  of  the  first  part,   and  Charles  A,  Drake,   of 
Geneva,  Ontario  County,  Mew  York ,  party     ofthe$econdpai*: 

WiUVtAtf  the  said         Edward  Simmons     Is JuMy  in,debted 

tothexUdparty  of  Oie  second  part,  i>*  the  sum  of      One      Thousand         (1,000) 
—^ dollars,  lawful  money  of  the  United  States,  secured 


to  be  paid  by 


his 


—  eertainiond  or  obligation  bearing  even  date  herewith,  conditioned 
for  the  payment  of  the  said  sum  of       One   Thousand         (1,000) 


dollars,  on  - 

nineteen  hundred  and      e  Ight  i 


the   fifteenth   dayof     September, 

■   and  the  interest  thereon,  to  be  computed 
attherateof    six   (6  )       per  centum  per  annum,  and  to 


from        the  date  hereof 
hepaid     semiannually, 

It  being  tberebl?  C^preaSlg  Hgreed  that  (he  whole  of  the  smd  pHndpal  sum  shaa  hecam» 
due  after  default  in  the  payTnent  of  interest,  taxes  or  assessments,  as  hereinafter  provided. 
Dow  tbiS  InbentUre  MltneSSetb,  That  the  said  parpy  of  ihe  first  pan,  for  the  betur 
securing  the  payment  of  the  said  sum  of  money  mentioned  in  the  condition  of  the  said  band 
or  obligation,  with  interest  thereon,  and  also  for  and  in  consideration  of  one  dollar,  paid  by  the^ 
said  part  y  of  the  second  part,  the  receipt  whereof  is  hereby  acknowledged,  di^&  hereby  grant  and 
release  unto  the  said  party    of  the  second  part,  and  to     his   heirs    :  and  assigns  forever 

BU  that  Tract  or  Parcel  of  Land,   situate  in  the  City  of 
Rochester, County  of  Monroe,   and  State  of  Mew  York,   and  more 
particularly  distinguished  as  lot  number  tweftly  (20)   as  laid 
down  on  a  map  of  Snyder  4  Stone's  subdivision  of  a  p«rt  of  the 
Strong  Tract  on  file  in  Monroe  County  Clerk's  office,   in  Liber 
5,   of  maps  at  page  88.       Said  lot  number  twenty  (20)    is  situ- 
ate on  the  east   side  of  Kenmore  Street,   and  is  thirty- three  (33) 
feet   in  width  front  and   rear,   and  one  hundred  end  flfty-r.ino 
(159)  feet  deep  


part  y    of  the  ftrd 


9ll0(tntV   with  (he  appurtenaneei  and  aU  the  estate  and  rights  of  the 
part  in  and  to  said  premises 

%1i  ^W  and  to  §UliU  the  above  granted  premises  unto  the  said  party     of  the  second  par^ 

or  attifns  forever. 


his  heirs 


MORTGAGES 
^tm&sA  ^Iwagj,  awt  if    the  said  Edwam  Slmnons, . 

i the  said  party   of  the  first  part,     his     heirs,  executors  or  administrators . 

duUl  pay  unto  the  said  pari  y  of  the  second  part,  hls  he!  rs  executors,  administrators  or 
assigns,  the  said  su,m  of  money  mentioned  in  the  condition  of  the  said  bond  or  obligation  and 
the  interest  thereon,  at  the  time  and  in  the  manner  mentioned  in  the  said  condition,  that  then 
these  presents  and  the  estate  hereby  granted  shall  cease,  determine,  and  be  void. 

^ttd  the  said     Edward  Sinrniona, . 

party     af  the  first  part,  covenants  with  the  part  y     of  the  seeond  pari  as  fdUowt : 

^if$t. That  the    said    Edward    fj^mmnna^  


315 


the  part  y  of  the  first  part  will  pay  the  indebtedness  as  hereinbefore  provided,  and  if  default 
be  made  in  the  payment  of  any  part  thereof,  tlie  part  y  of  the  second  part  shall  have  power 
to  sell  the  premises  therein  described,  according  to  law. 

J^MOnd. — That     the  said  Edward  Simmons, — _^__ 

the  part  y  of  the  first  part  wiU  keep  the  buildings  on  the  said  premises  insured  against 
loss  by  fire,  for  the  benefit  of  the  mortgagee. 

Qyltttn. — And  it  is  hereby  expressly  agreed,  that  the  whole  of  said  principal  sum,  shaU  become 
due,  at  the  option  of  the  said  part  y  of  the  second  part,  after  default  in  the  payment  of 
interest  for  thirty  days,  or  after  default  in  the  payment  of  any  tax  or  assessment 

for  thirty  days  after  notice  and  demand. 

,  that  the  said  part  y     of  the  first  part  will  execute  any  further  necessary  assurance  of 
the  title  to  the  Tnortgaged  premises,  and  will  forever  warrant  said  title. 
^n  ^ittt($i|$   ^bC7(0f,  the  said  party      of  the  first  part,  has  hereunto  set      his  ■ 
hand  and  seal  the  day  and  year  first  above  written. 


In  Presenee  of 


(^^^z^tt^0^ 


secure  the  payment  of  a  debt,  it  will  constitute  the  conveyance  a 
mortgage.  And  although  on  its  face  the  instrument  may  be  a 
deed,  a  court  of  equity  will  permit  it  to  be  shown  that  the  agree- 
ment really  was  that  the  conveyance  should  be  made  as  security 
for  a  debt  and  not  absolutely ;  therefore  when  this  is  shown, 
although  the  instrument  be  a  deed  in  form,  it  will  be  declared  a 
mortgage,  the  defeasance  clause  in  this  case  being  made  orally. 

In  the  case  oi  Morrow  v.  Jones,  41  Neb.  867,  Jones  gave  Morrow  a  real  e.s- 
tate  mortgage  to  secure  a  loan  of  money,  and  after  it  matured  Morrow  brought 
an  action  to  foreclose  the  mortgage  and  sold  the  property  for  a  sum  considerably 
less  than  the  debt  and  costs.  Before  the  sale  was  confirmed,  Morrow  wrote  a 
letter  to  Jones,  inclosing  a  deed  of  the  property,  in  which  Morrow  was  named 
as  grantee,  and  made  a  proposition  that  if  Jones  would  execute  and  return  the 
deed,  she  could  redeem  the  property  at  any' time  by  paying  the  amount  of 
the  mortgage,  costs,  and  interest.  Jones  accepted  the  proposition,  exe- 
cuted the  deed,  and  returned  the  same  to  Morrow,  who  immediately  placed 


3l6  REAL  PROPERTY 

it  upon  record.  Held,  that  the  relation  of  mortgagor  and  mortgagee  was  not 
changed  by  the  delivery  of  the  deed  on  the  terms  upon  which  it  was  obtained, 
and  that  the  deed  was  taken  as  further  security  for,  and  not  as  payment  of,  the 
mortgage  debt.  A  deed  of  real  estate,  absolute  in  form,  may  be  shown  by 
parol  to  have  been  intended  by  the  parties  as  security  for  a  debt,  and  as 
between  such  parties  it  will  be  construed  to  be  merely  a  mortgage. 

Covenants.  —  The  mortgage  may  or  may  not  include  one  or 
more  of  the  three  covenants  designated  as  first,  second,  and 
third  in  the  foregoing  mortgage.  They  are  often  inserted  for 
the  better  security  of  the  mortgagee.  The  first  clause  gives  the 
mortgagee  the  right  to  sell  the  property,  that  is,  to  foreclose  the 
mortgage  upon  default  of  the  payment  of  any  part  of  the  princi- 
pal as  agreed,  although  the  time  for  which  the  balance  is  to  run 
has  not  yet  expired.  In  this  mortgage  the  whole  amount  is  not 
payable  until  two  years  from  the  date  of  the  instrument,  but  if 
the  first  payment  is  not  made  one  year  from  that  date,  the  mort- 
gagee may  foreclose  the  mortgage  under  this  clause. 

The  second  clause  is  known  as  the  insurance  clause,  and  is 
inserted  when  the  mortgagee  does  not  deem  the  land,  aside  from 
the  buildings,  ample  security  for  the  loan. 

The  third  clause  is  called  the  interest,  tax,  and  assessment 
clause,  and  compels  the  mortgagor  to  pay  the  interest,  taxes, 
and  all  assessments  levied  against  the  property,  and  in  case  of 
default  for  a  given  number  of  days,  the  mortgagee  may,  if  he 
choose,  consider  the  whole  amount  of  the  debt  due  and  proceed 
with  the  same  remedies  as  though  the  time  within  which  the 
debt  was  to  have  been  paid  had  expired. 

Bond.  —  As  has  been  said,  the  debt  is  usually  represented  by 
a  note  or  bond,  by  which  the  mortgagor  personally  obligates 
himself  to  pay  the  debt  which  the  mortgage  is  given  to  secure. 
If  notes  are  given,  they  are  drawn  in  the  usual  form.  If  a  bond 
is  given,  it  is  drawn  in  such  form  as  to  contain  the  same  cove- 
nants as  the  mortgage.  A  bond  to  accompany  the  foregoing 
mortgage  would  be  in  the  form  shown  on  the  following  page. 
(Acknowledgment  as  on  page  98.) 

Assignment.  —  The  mortgagee  may  desire  to  sell  the  mortgage 
or  transfer  it  to  another  party.     This  he  may  do,  as  the  interest 


MORTGAGES 


317 


Innin  all  Bph  \\  ftpsp  'pmt%  t¥ 

I,  Edward  SinmonB,  of  Rochester,  Monroe  County,  Mew  York, . 


party  of  the  first  part,  am 


KM  and  ftrndy  bound  unto    CharleB  A.  Drake,  of  GeneTa.  Ontario 

County,  New  York,  party  of  the  second  part  ii» «fc«  j»m. »/ 

Two       thousand     (  2,000   )  SMan, 

lawful  money  of  the  United  States,  to  U  paid  to  the  $aid    Qiarles   A.    Drake 
or  to  his  certain  attorneys,  heirs,  exeeuton,  adminittrator$  or  assign*, 

^OT XOhxCh '^n^mevA    to  te  made  I      bind  myself,  my     heirs,  exeeuton 
and  administrators  J  0  Intly  &    B  everally/irmZy  by  these  presents. 
^SSXiti  mth     my     seal     Dated  the    fifteenth     day  of  —   Septemher— — 
One  Thousand  Nine  Kindred  and  Five 

%\iz  Condition  of  the  alrotre  ©Migatton  is  such;  that  if  the  abm» 

bounden       Edward  Simmons, . 

nis  heirs,  executors  or  administrators,  shall  pay  unto  the  above  named  Charles   A.   Drake, 
his  heirs  ,^ . . 

—  executors,  administrators  or  assigns,  the  sum  of —^ 

One      thousand       (  1,000   ) 

on  Oie   fifteenth  dayof        Septemher, 


nineteen  hundred  and  eight, 
the  date  hereof  


dollars, 

which  win  be  in  the  year 

and  the  interest  thereon,  to  be  computed  from 


at  and  after  the  rate  of  six  (6)  per  cent,  per  annum,  and  to  be  paid  semiannually  • 
(hen  the  above  (gUigatian  to  be  void,  othenvise  to  remain  in  fuU  force  and  virtue . 

%n&  it  is  ^crehg  Expressly  Agreed,  that  the  whou  of  the  said  pHndpat 

turn  shaU  become  due,  at  the. option  of  said  mortSaiee,  or  obligee,  after  default  in  tha  jtaytnen* 

of  interest  far  ■ 

thl  rty         days,  or  after  default  in  the  payTnent  of  any  tax  or  assessm,ent  for    tUl  rty 

— ^dayS         after  notice  and  demand. 

^ttd  the  said  party  of  the  first  part  also  covenant  with  the  party  of  the  second  part, 
that  the  part  Y  of  the  first  part  wiU  keep  the  buildings  on  the  said  premises  described  in  the 
mortgage  accompanying  this  Bond  insured  against  loss  by  fire  for  the  benefit  of  the  mortgagee. 


In  Tresence  of 


(l2/c^^til^  C^ 


3i8  REAL  PROPERTY 

of  the  mortgagee  in  the  property  mortgaged  is  subject  to  sale  as 
well  as  the  interest  in  the  property  remaining  in  the  mortgagor. 
The  assignee  takes  the  mortgage  with  all  of  the  rights  of  the 
assignor,  but  no  others.  The  mortgage  can  be  assigned  only 
by  an  instrument  in  writing  and  under  seal. 

In  the  case  of  Warden  v.  Adams.,  15  Mass.  233,  Adams  delivered  a  mort- 
gage to  a  third  party  for  the  purpose  of  having  him  draw  an  assignment  there- 
of to  Warden.  Before  this  assignment  was  prepared,  Adams  assigned  the 
mortgage  by  a  written  instrument  to  Hamilton,  another  creditor.  Hamilton 
knew  that  the  mortgage  was  in  the  third  party's  hands  for  the  purpose  of 
drawing  an  assignment  to  Warden.  Held,  that  Hamilton  was  entitled  to  the 
mortgage.  The  delivery  to  the  third  party  did  not  constitute  an  assignment. 
An  assignment  of  a  mortgage  can  be  made  only  by  a  written  instrument. 

An  ordinary  form  of  assignment  of  a  mortgage  is  shown  on 
the  following  page. 

Foreclosure.  —  The  remedy  of  the  mortgagee  when  the  debt 
secured  by  the  mortgage  is  not  paid  as  agreed  is  to  foreclose  his 
lien.  This  is  called  foreclosure  of  the  mortgage,  and  means  the 
proceedings  by  which  the  mortgaged  premises  are  applied  to 
the  payment  of  the  mortgage  debt,  and  by  which  the  equity  of 
redemption  is  barred  or  cut  off.  This  remedy  usually  consists 
of  an  action  in  the  courts  from  which  a  judgment  is  obtained, 
decreeing  that  the  property  be  sold  and  the  proceeds  applied 
toward  the  payment  of  the  mortgage  debt.  If  anything 
remains  after  the  costs  of  the  proceedings  and  the  mortgage 
debt  are  paid,  it  is  turned  over  to  the  mortgagor.  This  action 
bars  all  rights  of  the  mortgagor  to  the  property  and  cuts  off  his 
equity  of  redemption.  All  parties  interested  in  the  property 
must  be  made  parties  to  the  action,  so  that  they  will  have  notice 
of  the  proceedings  and  can  present  their  claims  to  the  court  if 
they  desire.  The  statutes  generally  require  that  the  property 
be  advertised  for  sale  in  the  papers  for  a  certain  length  of  time 
before  the  sale  takes  place.  In  case  the  property  does  not  sell 
for  enough  to  satisfy  the  debt,  a  personal  judgment  on  the  note 
or  bond  is  taken  for  the  balance,  this  being  called  a  deficiency 
judgment. 

Record.  —  Mortgages  are  required  to  be  recorded  in  the  same 
manner  as  de^ds,  in  order  to  give  notice  to  subsequent  pur- 


MORTGAGES 


319 


Inmn  all  %n  iq  \\m  |)m*  m 

I,  Charlea  A.  Drake,  of  GeneTa.  Ontario  County,  New  York, 
party ■ — ■ 


of  the  first  part,  in.  consideration  of  the  swn.of      one   dollar  ' 

_____—————    lawful  money  of  the  United  States,  to       me        in  hand  paid 

by    Pred  C.  White,  of  the  same  place,  party r 

of  the  second  part,  at  or  before  the  ensealing  and  delivery  of  these  presents,  (he  receipt  whereof 
is  hereby  acknowledged,  have  granted,  bargained,  sold,  assigned,  transferred  and  set  over,  and 
by  these  presents  do  grant,  bargain,  sell,  assign,  transfer  and  set  over,  unto  the  said  party  of  the 
second  part,  a  certain  Indenture  of  Mortgage,  bearing  date  the  fifteenth'  day 

of        September    -^— ^   in  the  year  one  thousand  nine  hundred  and     f  i  vft  j 


made  by      Edward  Simmons  to  Charles  A. 


Drake  to  secure  the  payment  of  the  eum  of  one  thousand  dollars 
($1,000.00)  i  and  Interest  from  the  date  thereof _, 


and  duly  recorded  in  the  office  of  the  —    Clerk  ■     of  the  — ^^— — ^^  County 

of      Monroe    on,  the    sixteenth  day  of    September  ,iflO 5, 

in- — ■ Ziber  523  «         page       271    , 

W00tttt(T  ^oHh  the  bond  or  obligation  therein,  described,  ana  the  money  due  and  to  grow  due 
thereon,  with  the  interest.  ^0  JXAVt  M&  tO  ItOttl  the  same  unto  the  said  paHV  of  the 
second  part       his        Iieirs     _^^—    and  asugns  for      his    or   their 


subject  only  to  the  proviso  in  the  said  Indenture  of  Mortgage  mentioned! 


1  do  hereby  make,  constitute  and  appoint  the  said  party   of  the  second  part 

tciy  true  and  lawfuZ  attorney,  irrevocable  in  hts  OWirf^Jne  or  otherwise,  but  at  his  proper 
costs  and  charges,  to  have,  use  and  take,  all  lawful  ways  and  means  for  the  recovery  of  the  said 
money  and  interest:  and  in  case  of  payment  to  discharge  the  same  as  fully  as  I  might  at 
could  do  if  these  presents  were  not  made. 

^tt  ^ttttl^^jl  WlitXtOf    I    have  hereunto  set  hand     and  seal     (he 

fourth        day  of  J   a  n  U   a   r  y  In  1^  year  one  ^thousand  nine  hundred  an^ 

Six  . 

Sealed  and  delivered  in  the  presence  of    C^^  ^         ^        -^  <^ jCJ  ^  JHIl 


320  REAL  PROPERTY 

chasers  of  the  property.  If  not  so  recorded,  they  are  in  most 
states  valid  as  between  the  original  parties,  but  not  against 
persons  who  have  purchased  in  ignorance  of  the  existence  of 
the  mortgage.  But  in  some  states  the  statutes  require  the 
mortgage  to  be  recorded  in  order  to  render  it  valid. 

Discharge.  —  If  the  mortgage  is  paid  according  to  its  terms 
when  it  becomes  due,  it  is  discharged ;  or  payment  after  it  is  due, 
but  before  an  action  is  brought  to  foreclose,  discharges  the 
mortgage.  In  order  to  cancel  the  mortgage  on  the  records,  a 
formal  discharge  is  executed  and  filed;  otherwise  the  mortgage, 
although  paid,  would  still  appear  by  the  records  to  stand  against 
the  property. 

The  mortgage  which  we  have  discussed  would  be  discharged 
in  the  following  form :  — 


STATE  OF  NEW  YORK, 
Counts  of — Onta 

I,  Pred  C.  White,   of  Geneva,  Ontario  County,  New  York,  assignee 
of  the  mortgage  hereinafter  described, 

3B)0  hereby  Certifie,  WAa^acn^atk  Jnt^nruieo^^ca^Q^e,  ^:eaim^<^ 

Me       fifteenth _  ^/^  a^  September  ,   one  Moudam/  nine 

Mnauaana       five  ,  tncu/e  atu/ eaoectUee/ ^u   Edward  Simmons 

to.  Charles.  A.  Drake,   and  thereafter  and  on,   or  about  the  fourth 
day  of  January,  1906,  by  an  instrument  in  writing  duly  assigned 


to  me 


an</Aecou^</ m  ^Ae  <yf&ce  <^/Ae  clerk  ^  /Ae  ^oun/y  ^Monroe 

^'Ael  523     (^  t^cifaaaed,  /la^e  271  ,       on 


Me     16th     aay  c^     Sefptember     tJn  /Ae yeai       1905 
iii  /kaea 


,Sm</  U^ </o  Aeie^  conden/  Ma^  Me  ^ame  /e  <AiioAaiae</ c^  'S^€coi</^ 

^a^e</  Me       first  </ay  ^   February  /f(/&  . 


LANDLORD  AND  TENANT  321 

Second  Mortgage. — The  mortgagor  may  place  a  second  or 
subsequent  mortgage  on  the  property.  Unless  it  is  otherwise 
stipulated,  the  mortgages  take  priority  according  to  their  date ; 
that  is,  the  second  mortgagee  gets  nothing  until  the  first  is  paid 
in  full.  But  in  case  the  first  mortgage  is  not  recorded  and  the 
second  mortgagee  has  no  notice  of  it,  the  second  mortgage  will. 
if  recorded,  have  priority. 

Any  mortgagee  may  foreclose  his  mortgage  when  it  is  past 
due  or  the  mortgagor  is  in  default,  but  he  can  not  affect  the 
interest  of  a  prior  mortgagee  by  such  proceeding,  although  he 
may  cut  off  any  subsequent  mortgagee.  By  foreclosing  his 
mortgage,  therefore,  the  holder  of  a  first  mortgage  will  bar  the 
second  mortgage,  and  if  the  property  sells  for  only  enough  to 
pay  the  first  mortgage,  the  second  mortgagee  will  lose.  Of 
course  if  the  property  sells  for  more  than  enough  to  pay  the 
first  mortgage,  the  balance  will  be  applied  on  the  second  mort- 
gage. If  the  second  mortgagee  forecloses,  he  must  sell  the 
property  subject  to  the  lien  of  the  first  mortgage. 

7.    LANDLORD  AND  TENANT 

Estates  for  Years.  —  We  have  discussed  freehold  estates  and 
estates  for  life.  But  estates  in  real  property  may  be  created  for 
a  shorter  definite  period.  These  are  called  estates  for  years. 
The  grantor  is  known  as  the  lessor  or  landlord,  and  the  grantee 
the  lessee  or  tenant.  The  contract  creating  an  estate  for  years 
is  a  lease. 

Leases.  —  By  the  statute  of  frauds  in  most  states  the  lease 
must  be  in  writing,  if  for  a  longer  time  than  one  year.  Gener- 
ally, if  for  one  year  or  less  it  may  be  made  orally,  and  this  is 
true  even  though  the  term  is  to  commence  at  a  date  in  the 
future.  In  a  few  states  leases  can  be  made  for  only  a  limited 
number  of  years,  while  in  others  a  lease  for  more  than  a  certain 
number  of  years  must  be  recorded. 

Toupin  V.  Peabody,  162  Mass.  473,  was  a  case  in  which  a  lease  for  a  term 
of  5  years  contained  a  provision  that  the  lessee  was  to  have  the  privilege  of 
renewing  the  lease  upon  the  same  terms  for  a  further  period  of  5  years.     Held, 

COM.  LAW  —  21   , 


322  HEAL  PROPERTY 

that  it  was  a  lease  for  more  than  7  years  under  the  meaning  of  the  statute, 
which  provided  that  all  leases  for  over  7  years  are  invalid  as  against  all 
but  the  parties  to  them  and  persons  having  actual  notice  of  their  existence. 
Therefore,  so  far  as  it  purported  to  give  the  grantee  the  privilege  of  renewing, 
it  was  invalid  as  against  a  purchaser  of  the  premises  without  actual  notice 
of  the  lease,  it  never  having  been  recorded. 

On  the   following  page  is  a  common  form  of  lease. 

Covenants.  —  Aside  from  the  above  provisions,  any  further 
agreement  between  the  parties  may  be  incorporated  in  the  writ- 
ing. A  lease  is  but  a  contract,  and  the  full  agreement  of  the 
parties  should  be  set  forth.  Frequently  the  following  covenant 
is  inserted:  "The  party  of  the  second  part  hereby  covenants 
not  to  sublet  said  premises,  or  any  portion  thereof,  without  the 
written  consent  of  said  party  of  the  first  part; "  or  the  following  : 
"  It  is  further  mutually  covenanted  and  agreed  that,  in  case  the 
buildings  or  tenements  on  said  premises  shall  be  destroyed  or 
so  injured  by  fire  as  to  become  untenantable,  then  this  lease 
shall  become  thereby  terminated,  if  said  second  party  shall  so 
elect ;  and  in  such  case,  he  shall  vacate  said  premises  and  give 
immediate  written  notice  thereof  to  said  landlord,  in  which  case 
rent  shall  be  due  and  payable  up  to  and  at  the  time  of  such 
destruction  or  injury." 

Term.  —  The  term  of  the  lease  is  the  time  for  which  it  is  to 
run.  In  the  following  lease,  it  is  two  years.  If  the  tenant  has 
been  in  possession  under  a  lease  for  one  or  more  years,  and  he 
retains  possession  without  executing  a  new  lease,  he  is  presumed, 
in  the  absence  of  some  agreement,  to  be  a  tenant  from  year  to 
year,  which  means  that  his  term  after  the  expiration  of  the  lease 
is  one  year,  and  if  he  remains  in  possession  after  the  next  year 
he  is  a  tenant  for  another  year. 

In  Haynes  v.  Aldrich,  133  N.Y.  287,  defendant  leased  certain  premises  for 
a  year,  the  term  expiring  May  i .  Before  the  expiration  of  the  time,  defend- 
ant informed  plaintiff  that  she  did  not  wish  to  renew  her'  lease  for  another 
year.  May  i  was  a  holiday,  and  possession  was  retained  until  May  4,  the 
excuse  given  being  the  difficulty  to  get  trucks  to  move  defendant,  also  that  on 
the  3d  of  May  one  of  the  boarders  was  ill.  On  the  afternoon  of  the  4th 
of  May  the  keys  were  tendered  plaintiff  and  refused.  Held,  that  the  plaintiff 
was  entitled  to  consider  the  lease  renewed  for  another  year.  It  was  in  the 
option  of  the  landlord  so  to  regard  it  or  to  accept  the  surrender  of  the  premises. 


LANDLORD  AND   TENANT  323 

Made  and  executed    Qgtflp^^        William  E.   Weaver 

of  the .Cl.ty....TrrrrL-of...- JBufr.aI.Q .:,  New  York,  of  the  first  part, 

and_ - - ;...Xyman CQlllns „j „ .. 


of  the Ci-tX:. 

this fiftb... 

and ttY.SI..._ 


_ofj:==LjRfi.cll.e-&tex.r=!r:: 
.-day  of-.- loyember 


- ■,  New  York,  of  the  second  part, 

-in  the  year  One  thousand  nine  hundred 


Jtt  CO)t0td^tAttOn  of  the  rents  and  covenants  hereinafter  expressed,  the  said  party  of  the 
first  part  has   Semtse)  an^  fieoeeb,   and  does  hereby  demise  and  lease  to  the  said  party      of  the 

second  part-J —  ,  the  following  premises,  viz : 

The  house,  bam  and  lot  known  as  number  406  South  Street   In 

.s.al<i_c.lty_j3if_.jiio,.ch.e.s.t..ex».. 


with  the  privileges  and  appurtenances,  for  and  during  the  terra  of..':T:.t..WQ....y.eair.8 : 

-■.-J=rr::..irom  thp first  Hay  of December L.igo  5 

which  term  will  end -J- ir.Q7:.emb.er.....3Q.,-.JL8QJZ-t-rr=::i..  , .      ..    . 

And  the  said  party      of  the  second  part  covenants  that    he    will  pay  to  the  party  of  .the  first  part, 

for  the  use  of  said  premises,  the niOnthly....rrr-..rent  of FOIlty .     ..  .    -=r!=s. 

Dollars  ($  ...40 .00... ),  to  be  paid m.on.thly  In  advance  or 

of  each  and  every  month  during  said  term. 

(Rttb  npWDlb^b,  safd  part  y      of  the  second  part  shall  fail  to  pay  said  rent,  or  any  part  thereof, 

when  it  becomes  .  due— ^r:::: . — .  —  ^^^ 

i»  is  agreed  that  said  party 
of  the  first  part  may  sue  for  the  same,  or  re-enter  said  premises,  or  resort  to  any  legal  remedy. 

The  part  y    of  the_Jfil!&i part  agrefi  to  pay  all . Ltaxes  to  be  assessed 

on  said  premises  during  said  term _ , ■ — - 

The  party      of  the  second  part  ffTi/^iaa/B  that  at  the  expiration  of  said  term   Af    will  surrender 
up  said  premises  to  the  party  of  the  first  part  in  as  good  condition  as  now,  necessary  wear  and 

damage  by  the  elements  evf^pptpH 


U/wii08  the  hands  and  seals  of  the  said  parties  the  day  and  year  first  above  written. 

^OlMZce-s^uiumldJ^SCLtl^A^ [L.  8.] 


324  REAL  PROPERTY 

Express  and  Implied  Covenants.  —  The  covenants  contained  in 
a  lease  are  either  expressed  or  implied.  The  implied  covenants 
exist  whether  they  are  mentioned  or  not ;  the  express  covenants 
must  be  included  in  the  express  conditions  of  the  lease,  and  may 
be  many  or  few. 

The  implied  covenants,  on  the  part  of  the  lessor,  are  those 
regarding  quiet  enjoyment  and  the  payment  of  taxes.  The 
usual  words  of  grant  in  a  lease  are  "demise  and  lease,"  or 
"grant  and  demise,"  these  words  being  said  to  import  a  cove- 
nant of  quiet  enjoyment.  This  covenant  is  broken  when  the 
tenant  is  evicted  by  some  one  who  has  a  paramount  title. 

Duncklee  v.  Webber,  151  Mass.  408,  was  an  action  for  breach  of  an  implied 
covenant  of  quiet  enjoyment  of  a  written  lease  for  one  year.  Within  the 
time  the  property  was  sold  under  a  mortgage  ;  and  the  plaintiff,  upon  receiv- 
ing notice  to  quit,  followed  by  threats  of  ejectment,  moved  away.  Held,  that 
plaintiff  could  recover. 

The  landlord  also  impliedly  covenants  that  he  will  pay  all 
taxes  assessed  against  the  premises  during  the  term.  There  is 
no  implied  covenant  on  the  part  of  the  lessor,  or  landlord,  that 
the  premises  are  in  a  tenantable  condition. 

Reeves  v.  McComeskey,  168  Pa.  St.  571,  held,  that  no  implied  covenant 
that  the  landlord  warrants  the  leased  premises  to  be  tenantable,  or  that  he 
undertakes  to  keep  them  so,  arises  out  of  the  relation  of  landlord  and  tenant ; 
and  in  the  absence  of  a  provision  in  a  lease  that  the  lessor  shall  make  repairs, 
it  is  no  defense  to  an  action  for  rent  that  the  premises  are  not  in  a  tenantable 
condition. 

Lucas  V.  Coulter,  104  Ind.  81,  was  an  action  for  rent  of  a  store  leased  to 
defendant.  The  defense  was,  that  the  store  was  rented  for  the  manufacturing 
and  selling  of  musical  instruments,  and  that  it  was  so 'imperfectly  and  defect- 
ively constructed  that  rain  and  sand  came  through  the  roof  and  ceiling, 
causing  damage  to  the  instruments.  Held,  that  in  the  letting  of  a  store, 
room,  or  house,  there  is  no  implied  warranty  that  it  is,  or  shall  continue  to  be, 
fit  for  the  purpose  for  which  it  is  let.  The  tenant  must  determine  for  himself 
the  safety  and  fitness  of  the  premises. 

On  the  part  of  the  lessee,  or  tenant,  there  is  an  implied  cove- 
nant that  he  shall  pay  the  rent  stipulated  for ;  and,  although  no 
sum  is  specified  in  the  lease,  the  tenant  must  pay  a  reasonable 
rent,  unless  it  appears  that  it  was  the  intention  of  the  parties 
that  none  was  to  be  paid. 


LANDLORD  AND  TENANT  325 

The  lessee  also  impliedly  covenants  to  repair,  and  if  the  leased 
premises  consist  of  a  farm,  it  is  implied  that  he  is  to  cultivate  it 
in  a  husbandlike  manner.  The  covenant  to  repair  is  not  to 
rebuild  when  the  property  is  burned  down,  but,  as  it  is  said,  to 
keep  it  "  wind  and  water  tight,"  that  is,  to  keep  the  roof  from 
leaking  and  the  siding  tight.  The  premises  must  be  kept  in 
repair,  except  for  ordinary  wear  and  tear. 

Turner  v.  Townsend,  42  Neb.  376,  was  a  case  in  which  the  tenant  sued  the 
landlord  for  the  value  of  a  front  window  in  the  leased  store.  The  window  had 
been  broken  by  a  storm  during  the  tenancy  and  replaced  by  the  tenant,  the  land- 
lord having  refused  to  put  in  a  new  one.  Held,  that  he  could  not  recover.  The 
landlord  is  not  bound  either  to  repair  leased  premises  himself  or  to  pay  for  the 
repairs  made  by  his  tenant  unless  he  has  expressly  contracted  to  make  the 
repairs. 

Auworth  W.Johnson,  5  C.  &  P.  (Eng.)  239,  held,  that  a  tenant  of  a  house 
from  year  to  year  is  bound  only  to  keep  it  wind  and  water  tight. 

Rights  and  Liabilities  under  a  Lease.  —  Aside  from  the  cove- 
nants in  a  lease  there  are  certain  rights  and  liabilities  which  arise 
from  the  relation  of  landlord  and  tenant.  In  the  absence  of  an 
agreement  to  the  contrary  the  tenant  is  entitled  to  the  exclusive 
possession  of  the  premises.  He  is  liable  for  waste  and  is  estopped 
from  denying  his  landlord's  title,  that  is,  the  tenant  can  not  for 
any  purpose  claim  that  the  premises  do  not  belong  to  his  landlord. 

Gray  v.  Johnson,  14  N.H.  414,  held,  that  if  a  tenant  recognizes  the  title  of 
his  landlord  by  accepting  a  lease  or  by  paying  the  rent,  he  will  be  estopped 
during  the  term  of  his  tenancy  from  disputing  it,  although  the  want  of  title 
may  appear  from  the  landlord's  own  testimony. 

Hamilton  v.  Pittock,  158  Pa.  St.  457,  held,  that  a  lessee  of  an  oil  lease  who 
takes  a  second  lease  of  the  same  premises  from  a  person  claiming  adversely  to 
the  original  lessor,  can  not  refuse  to  pay  the  rent  under  the  second  lease  on 
the  ground  that  the  lessor  in  the  first  lease  had  the  better  title  to  the  land. 

As  we  have  seen  in  the  case  of  a  life  tenant  on  page  295, 
the  tenant  is  entitled  to  emblements  when  his  estate  is  cut  off 
by  some  contingency  without  his  fault. 

In  the  case  of  Gray  v.  Worst,  129  Mo.  122,  Shoemaker  owned  some  land, 
of  which  he  gave  a  deed  in  trust  to  Toms  to  secure  a  loan.  Shoemaker  after- 
wards leased  the  land  to  defendant  for  a  year  and  defendant  paid  the  rent  in 
full.    Before  defendant  had  harvested  his  crops  Toms  foreclosed  his  claim  and 


326  REAL  PROPERTY 

sold  the  property  to  plaintiff.  Plaintiff  at  once  claimed  the  crops  as  owner  of 
the  land,  but  defendant  as  lessee  gathered  them  before  leaving.  In  this  action 
for  the  value  of  the  crops  it  was  held  that  the  lessee  was  entitled  to  them  and 
plaintiff  could  not  recover. 

The  landlord  is  under  no  obligation  to  repair  unless  the  lease 
expressly  binds  him  to  such  duty.  And  he  is  entitled  to  the 
fixtures  annexed  to  and  made  a  part  of  the  realty.  The  ques- 
tions as  to  when  the  fixtures  may  be  removed  by  the  tenant,  and 
when  they  may  be  claimed  by  the  landlord,  have  been  discussed 
in  the  chapter  on  Sales. 

Assigning  or  Subletting  of  Lease.  —  Unless  the  tenant  is  re- 
strained by  an  express  covenant  against  subletting  or  assigning, 
he  may  assign  or  sublet  his  lease  without  the  consent  of  the  land- 
lord. If  the  interest  granted  by  the  lessee  is  for  a  shorter  time 
or  for  rights  inferior  to  those  granted  in  his  own  lease,  it  is  a 
sublease. 

In  Collins  v.  Hasbrouck,  56  N.Y.  157,  it  was  held  that  where  a  lessee  exe- 
cutes an  instrument  conveying  the  whole  of  his  unexpired  term,  but  reserving 
rent  at  a  rate  and  time  of  payment  different  from  those  in  the  original  lease, 
and  a  right  of  reentry  on  non-payment  of  rent  and  the  breach  of  other  condi- 
tions, and  also  providing  for  a  surrender  of  the  premises  to  him  at  the  expiration 
of  the  time,  the  instrument  is  a  sublease  and  not  an  assignment. 

And  in  the  case  of  a  sublease  the  subtenant  is  not  liable  for 
rent  to  the  original  lessor,  but  only  to  the  original  lessee. 

Trustees  v.  Clough,  8  N.H.  22,  held,  that  he  to  whom  the  lessee  sublets  for 
but  a  part  of  the  term  is  only  a  subtenant  and  not  an  assignee  of  the  terra.  _ 
Such  subtenant  is  not  liable  to  the  original  lessor  for  the  rent. 

If  the  interest  conveyed  by  the  tenant  is  his  whole  interest  in 
the  lease,  it  is  an  assignment  of  the  lease,  and  the  assignee  is  lia- 
ble to  the  original  lessor  for  rent.  In  the  case  of  an  assignment 
of  the  lease  the  landlord  may  look  to  either  the  original  lessee 
or  to  the  assignee  of  the  lease  for  the  rent.  The  assignee  takes 
all  of  the  interest  of  the  original  tenant  and  is  bound  to  pay 
rent,  to  repair  and  to  use  the  property  in  any  special  way  pro- 
vided for  in  the  lease.  But  these  obligations  of  the  assignee  of 
the  lease  do  not  in  any  way  release  the  original  lessee  from  his 
obligations  to  his  lessor. 


LANDLORD  AND   TENANT 


327 


In  the  case  of  ^'i^wdSfrj  V.  Partridge,  108  Mass.  556,  the  lessees  of  real  estate 
granted  to  them  for  ten  years  by  a  written  lease,  delivered  the  lease  to  defend- 
ant with  the  indorsement  by  which  they  assigned  to  him  all  their  "right,  title, 
and  interest  in  and  to  the  within  lease."  Neither  the  lessee  nor  the  defend- 
ant personally  occupied  the  premises,  but  after  the  assignment  the  rents  were 
turned  over  to  defendant.  Held,  that  the  landlord  can  maintain  an  action 
against  the  defendant  for  the  rent. 

Eviction.  —  At  the  expiration  of  the  lease  the  landlord  is  enti- 
tled to  the  possession  of  the  premises,  and  if  the  tenant  does  not 
surrender  them,  the  landlord  may  institute  proceedings  to  evict 
him.  The  statutes  in  the  different  states  provide  the  procedure 
by  which  the  tenant  holding  over  after  his  lease  has  expired  may 
be  evicted  on  short  notice.  This  is  termed  "  summary  proceed- 
ings." This  form  of  procedure  is  also  provided  by  statute  for 
the  eviction  of  the  tenant  when  he  does  not  pay  his  rent.  The 
landlord  who  wishes  to  evict  a  tenant  by  summary  proceedings 
obtains  a  process  from  some  court  which  is  served  upon  the  ten- 
ant, and  if  it  is  found  by  the  court  when  the  case  comes  up  for 
a  hearing  that  the  landlord  is  entitled  to  the  possession  of  the 
premises,  the  court  empowers  one  of  its  officers  to  evict  the  ten- 
ant from  the  premises. 

Where  the  tenancy  is  not  for  any  fixed  period,  but  is  a  ten- 
ancy from  year  to  year  or  month  to  month,  it  can  not  be  termi- 
nated by  either  party  except  by  notice.  Under  the  common  law 
a  tenancy  from  year  to  year  could  be  terminated  by  notice  six 
months  before  the  expiration  of  the  period,  and  in  the  case  of 
a  tenancy  for  a  shorter  period,  as  from  month  to  month,  by  a 
notice  equal  to  the  length  of  the  period. 

In  Steffens  v.  Earl,  40  N.J.  L.  128,  it  was  held  that  in  monthly  tenancies 
a  month's  notice  to  quit  is  sufficient,  but  the  notice  must  be  to  quit  at  the  end 
of  one  of  the  monthly  periods. 

Until  this  notice  has  been  given,  the  landlord  can  not  evict  the 
tenant,  and  until  the  tenant  has  given  a  like  notice  to  the  land- 
lord, he  is  liable  to  be  held  for  the  rent  unless  the  landlord 
accepts  his  surrender  of  the  premises.  The  statutes  in  the 
different  states  have  in  many  instances  changed  the  common 
law  rule  and  a  shorter  notice  is  rendered  sufficient. 


328  REAL  PROPERTY 

QUESTIONS    ON    REAL    PROPERTY 

1.  Define  real  estate. 

2.  Is  a  dwelling  house  real  estate? 

3.  Who  owns  the  bed  of  a  stream  which  is  not  navigable  ? 

4.  A  has  a  farm  upon  which  there  is  a  pond  one  half  mile  in  diameter. 
Has  A  the  right  to  prohibit  people  from  fishing  and  rowing  upon  this  pond  ? 

5.  A's  farm  has  a  small  river  running  through  it.     Has  A  the  exclusive 
right  to  fish  on  the  part  running  through  his  property? 

6.  In  the  above  case,  if  the  river  had  been  a  navigable  stream,  what  exclu- 
sive rights  would  A  have  had  ? 

7.  In  questions  4  and  5  to  whom  would  ice,  freezing  on  the  water  men- 
tioned, belong?     In  question  6  to  whom  would  the  ice  belong? 

8.  Define  corporeal  real  property.    Incorporeal  real  property.    Easement. 
Give  an  illustration  of  each. 

9.  Define  an  estate  in  fee  simple. 

10.  What  is  the  right  of  eminent  domain? 

11.  Wilson  owns  the  absolute  title  in  a  farm.  He  dies  leaving  his  widow 
the  use  of  it  during  the  remainder  of  her  life.  She  leases  it  to  Johnson  for 
one  year.  What  estate  in  the  land  did  Wilson  have?  What  estate  did  his 
widow  receive  after  his  death?     What  estate  did  Johnson  have? 

12.  In  the  above  case  could  Wilson's  widow  grant  to  any  one  an  estate  in 
the  land  that  would  exist  beyond  her  own  life  ?  Could  she  grant  an  estate  in 
the  land  that  would  last  as  long  as  she  lived? 

13.  Had  Wilson's  widow  the  right  to  cut  timber  on  the  farm  for  the  purpose 
of  repairing  the  buildings?  For  use  as  fuel?  To  sell  for  lumber?  To  use 
in  manufacturing  wagons? 

14.  Explain  what  is  meant  when  it  is  said  that  a  life  tenant  must  not  com- 
mit waste. 

15.  In  question  11  suppose  there  was  a  coal  mine  on  Wilson''s  farm  which 
he  had  been  working  during  his  life.  Can  his  widow  continue  to  work  it 
under  her  life  estate?  Can  she  open  it  and  work  it  if  it  had  existed  on  the 
farm  but  had  never  been  worked? 

16.  If  Wilson's  widow  should  sow  a  field  of  wheat  on  the  farm  and  then  die 
before  it  was  harvested,  would  the  wheat  belong  to  her  estate,  or  to  the  person 
to  whom  Wilson  had  left  the  farm  after  his  widow's  death  ? 

17.  Name  and  define  the  three  estates  by  marriage. 

18.  What  conditions  are  necessary  in  order  that  the  husband  shall  have 
an  interest  as  a  tenant  by  curtesy  in  his  wife's  real  property? 

19.  If,  in  question  11,  Wilson  had  not  left  any  will,  what  would  the  interest 
which  the  widow  would  have  taken  in  his  land  be  called?  What  interest  in  it 
would  she  have  obtained  under  the  common  law? 

20.  A,  a  married  man,  buys  a  farm  for  $5000,  and  gives  back  a  purchase 
money  mortgage  for  $4000,  paying  the  balance  of  $1000  in  cash.    A's  widow 


J 


REAL  PROPERTY 


329 


does  not  join  in  the  mortgage.  Upon  A's  death  will  his  widow  have  dower 
in  the  whole  farm,  or  will  the  mortgage  which  she  did  not  sign  come  in  ahead 
of  it? 

21.  If,  in  the  above  case,  the  mortgage  given  by  A  had  not  been  a  purchase 
money  mortgage,  but  had  been  given  some  years  after  A  had  purchased  the 
farm  and  his  wife  had  not  joined  in  it,  in  what  part  of  the  land  would  the 
widow  have  taken  dower? 

22.  What  are  homestead  rights?    Did  they  exist  at  common  law? 

23.  Property  is  conveyed  to  A  to  hold  in  trust  for  B,  a  minor  child,  until 
he  shall  become  of  age,  the  use  and  benefit  of  the  property  to  go  to  B.  What 
estate  in  the  land  has  A?     What  estate  has  B? 

24.  Distinguish  between  joint  tenancies  and  tenancies  in  common. 

25.  What  do  we  call  an  agreement  to  convey  land? 

26.  What  is  a  deed,  and  what  are  the  two  principal  classes  of  deeds? 

27.  Name  six  requisites  of  a  valid  deed  of  conveyance. 

28.  What  is  the  granting  clause?     Is  it  necessary  to  a  valid  deed? 

29.  What  is  the  habendum  clause  in  a  deed,  and  with  what  words  does  it 
begin  ? 

30.  A  gave  a  deed  to  B.  In  the  granting  clause  it  recited  that  an  absolute 
conveyance  was  given  to  B.  In  the  habendum  it  recited  that  B  had  a  title  in 
fee  subject  to  a  life  estate  in  C.    What  estate  did  B  get  under  the  deed? 

31.  Is  a  date  necessary  to  the  validity  of  a  deed?  From  what  time  does  a 
deed  take  eifect  ? 

32.  Fisher  draws  a  deed  of  a  house  and  lot,  naming  his  grandson  as  grantee. 
He  places  the  deed  in  his  safe,  and  after  two  years  dies.  The  deed  is  found 
and  the  grandson  claims  the  property  under  it.     Can  he  recover  the  property? 

33.  If,  upon  drawing  the  deed,  Fisher  had  given  it  to  his  banker  to  hold 
until  his  death  to  deliver  to  the  grandson  at  that  time,  could  the  grandson  hold 
the  land?    What  kind  of  delivery  to  the  banker  would  this  have  been? 

34.  What  is  the  acknowledgment? 

35.  Is  the  deed  valid  as  between  the  parties  when  it  is  not  recorded?  Is 
it  valid  as  to  third  parties  who  had  no  notice  of  it  and  who  acquired  rights  to  the 
land  after  it  was  given  ? 

36.  What  is  the  covenant  of  seizin,  and  when  is  it  broken? 

37.  What  is  the  covenant  of  quiet  enjoyment? 

38.  A  sold  a  farm  to  B,  and  in  the  deed  there  was  a  covenant  of  quiet 
enjoyment.  After  B  obtained  possession,  C,  a  third  party,  claimed  title  to 
the  farm  and  brought  an  action  against  B  to  recover  it.  In  this  case  C  was 
defeated,  as  the  court  decided  he  had  no  claim  whatever.  Was  A's  covenant 
of  quiet  enjoyment  broken?  If  C  had  recovered  in  his  action,  would  the 
covenant  of  quiet  enjoyment  have  been  broken  ? 

39.  What  is  the  covenant  against  incumbrances? 

40.  If,  in  question  38.  A's  deed  had  contained  a  covenant  against  incum- 
brances and  there  had  existed  a  judgment  on  record  against  A,  which  was  a 


330  REAL  PROPERTY 

lien  upon  the  property,  would  the  covenant  have  been  broken?  If  there 
had  been  unpaid  taxes  against  the  property,  would  the  covenant  have  been 
broken? 

41.  What  is  the  covenant  of  further  assurance? 

42.  What  is  the  covenant  of  warranty  of  title? 

43.  If  A's  deed  to  B,  in  question  38,  had  contained  a  warranty  of  title,  and 
after  B  had  possession  D  had  gone  upon  the  land  and  removed  a  building 
which  he  had  erected  temporarily  and  which  he  had  the  right  under  an  agree- 
ment to  remove,  would  the  covenant  have  been  broken? 

44.  Does  a  quitclaim  deed  contain  any  of  the  covenants  of  a  warranty  deed  ? 

45.  What  covenant  is  sometimes  used  in  a  quitclaim  deed? 

46.  What  is  a  mortgage? 

47.  Under  the  common  law,  was  it  the  mortgagor  or  the  mortgagee  that 
had  the  legal  title  to  the  mortgaged  property? 

48.  In  most  of  the  American  states  which  party  has  the  legal  title  to  the 
property? 

49.  What  is  the  defeasance  clause  in  a  mortgage? 

50.  What  three  covenants  are  often  included  in  a  mortgage?  Are  they 
necessary  to  the  validity  of  a  mortgage  ? 

51.  Why  is  a  note  or  bond  generally  given  with  the  mortgage? 

52.  Can  a  mortgagee  assign  his  interest  in  a  mortgage?  Can  it  be 
assigned  orally? 

53.  What  is  the  remedy  of  the  mortgagee  when  the  debt  secured  by  the 
mortgage  is  not  paid  as  agreed? 

54.  Is  an  unrecorded  mortgage  valid  as  between  the  original  parties?  Is  it 
valid  as  to  third  parties  who  have  acquired  subsequent  interests  in  the  land? 

,  55.  Can  the  mortgagor  place  more  than  one  mortgage  upon  the  same  piece 
of  property?     If  so,  which  mortgage  has  the  preference? 

56.  Must  a  lease  of  land  for  more  than  one  year  be  in  writing? 

57.  A  rents  a  house  and  lot  of  B  for  one  year  at  the  annual  rental  of  $200. 
At  the  end  of  the  year  nothing  is  said  and  he  remains  for  another  year,  pay- 
ing his  rent.  After  remaining  in  the  house  for  two  months  of  the  third  year  A 
vacates  it.     B  claims  the  rent  for  the  whole  year.     Can  he  recover? 

58.  What  are  the  two  implied  covenants  on  the  part  of  the  lessor? 

59.  Is  there  an  implied  covenant  on  the  part  of  the  lessor  that  the  premises 
are  in  a  tenantable  condition?  Is  there  an  implied  covenant  on  the  part  of 
the  lessee  that  he  will  pay  rent?  If  the  rent  is  not  specified  in  the  lease,  how 
much  will  he  be  required  to  pay? 

60.  If  there  is  no  covenant  to  that  effect  in  the  lease,  is  there  an  implied 
covenant  on  the  part  of  the  landlord  to  repair  during  the  term  of  the  lease? 

61.  Is  there  an  implied  covenant  on  the  part  of  the  lessee  or  tenant  to  re- 
pair during  the  term  of  the  lease? 

62.  Does  the  covenant  to  repair  require  the  rebuilding  of  the  premises  if 
they  are  burned  down? 


REAL  PROPERTY  33 1 

63.  Hamilton  leases  a  house  and  lot  of  Turner.  He  does  not  pay  his  rent 
and  Turner  sues  him.  Hamilton  claims  that  Turner  is  not  the  owner  of  the 
property,  and  it  develops  upon  the  trial  that  a  third  party  has  a  paramount 
title.     Can  Hamilton  defeat  Turner's  suit  for  rent  in  this  way? 

64.  A  leases  his  farm  to  B  for  one  year.  C,  a  mortgagee,  forecloses  a  mort- 
gage on  the  farm  against  A  and  sells  it  to  D,  who  takes  possession  and  ousts 
B  before  he  has  an  opportunity  of  harvesting  his  crops.  To  whom  do  the 
crops  belong,  D  or  B  ? 

65.  If  there  is  no  restriction  in  the  lease,  can  the  tenant  assign  his  rights? 

66.  Emery  leases  a  building  for  one  year  and  then  leases  all  but  one  room 
to  Boland  for  the  whole  length  of  his  term.  Which  does  this  constitute,  an 
assignment  or  a  subletting? 

67.  In  the  above  case  the  owner  of  the  building  sues  Boland  for  the  rent. 
Can  he  recover? 

68.  If,  in  question  66,  Emery  had  rented  the  entire  building  for  the  full  term 
of  his  lease  to  Boland  without  any  restrictions,  what  would  it  have  constituted, 
an  assignment  or  a  subletting? 

69.  In  question  68  the  landlord  sues  Boland  for  the  rent.    Can  he  recover? 

70.  If  the  tenant's  lease  of  the  property  is  for  a  definite  time,  how  may 
the  landlord  evict  him  at  the  end  of  his  term,  provided  he  does  not  voluntarily 
surrender  the  property? 

71 .  If  the  tenant  is  holding  from  year  to  year,  how  must  the  landlord  pro- 
ceed in  order  to  terminate  the  tenancy? 


COURTS   AND   THEIR  JURISDICTION 

Courts.  —  We  have  dealt  with  law  as  defining  the  rights  and 
limitations  of  individuals  in  their  dealings  with  one  another ;  but 
these  rights  must  often  prove  of  little  value  in  protecting  the 
individual  in  his  property  and  personal  relations  unless  a 
means  of  enforcing  them  is  provided.  For  this  purpose  the 
Constitution  of  the  United  States  has  established  a  system  of 
Courts. 

Jurisdiction. — The  jurisdiction  of  a  court  is  defined  as  the  power 
to  hear  and  determine  a  cause.  The  courts  of  a  particular  class 
are  empowered  to  hear  only  a  certain  line  of  causes  or  disputes ; 
while  another  line  of  cases,  involving  different  amounts  or  arising 
between  different  parties  or  being  of  a  different  nature,  will  be 
determined  by  entirely  different  courts.  It  is  essential  in  all 
cases  that  the  particular  court  before  which  a  question  is  brought 
for  determination  shall  have  jurisdiction,  for  if  it  has  not,  its 
decision  is  of  no  effect,  and  may  be  set  aside  at  any  time. 

Jurisdiction  of  Subject-matter.  —  The  jurisdiction  of  a  court 
must  be  both  of  the  subject-matter  and  of  the  person.  Juris- 
diction of  the  subject-matter  means  the  power  of  the  court 
regarding  the  subject  or  thing  in  dispute.  Thus,  in  an  action 
concerning  the  title  to  a  particular  piece  of  land  in  Monroe 
County,  New  York,  if  the  case  were  brought  in  the  county 
court  of  Erie  County,  New  York,  this  court  would  have  no 
jurisdiction  of  the  question  of  the  title  to  land  outside  of  Erie 
County,  therefore,  there  would  be  a  lack  of  jurisdiction  of 
the  subject-matter.  Again,  the  justice  courts  in  New  York 
have  no  power  to  determine  questions  affecting  the  title  to  real 
property,  and,  therefore,  the  above  case  could  not  be  determined 
by  a  justice  court,  as  such  court  has  no  jurisdiction  of  the  sub- 
ject-matter. 

332 


COURTS  AND   THEIR  JURISDICTION"  333 

Jurisdiction  of  the  Person.  —  Jurisdiction  of  the  person,  or  of 
the  party,  against  whom  an  action  or  cause  is  brought,  is  neces- 
sary, or  the  decision  will  have  no  effect  as  against  such  person 
or  party.  For  example,  a  court  of  the  state  of  Michigan  can 
determine  only  matters  of  its  own  subjects.  It  can  not  therefore 
compel  a  resident  of  another  state  to  obey  its  commands  unless 
it  obtains  jurisdiction  of  the  person  while  within  the  state  of 
Michigan.  Jurisdiction  of  the  person  is  generally  acquired  by 
the  service  of  a  notice  or  command  upon  the  party,  which 
notice  is  generally  called  a  summons  and  will  be  treated  of 
later. 

Classification  of  Courts.  —  The  courts  of  the  United  States  and 
of  the  different  states  may  be  arranged  under  several  classifica- 
tions, which  we  will  consider  in  the  following  order :  — 

Courts  of  Original  Jurisdiction. 

Courts  of  Appellate  Jurisdiction. 

Courts  of  both  Original  and  Appellate  Jurisdiction. 

Courts  of  Record. 

Courts  Not  of  Record. 
Law 
.  Equity. 

Criminal  Courts. 

Courts  of  General  Jurisdiction. 

Courts  of  Limited  or  Special  Jurisdiction. 

Courts  of  Original  Jurisdiction.  —  Courts  of  Original  Jurisdic- 
tion are  those  courts  that  have  authority  to  hear  and  determine 
questions  when  they  are  first  presented  for  judicial  determination 
or  decision.  They  are  the  courts  that  hear  both  sides  of  the  dis- 
pute and  render  their  decision  therefrom. 

Courts  of  Appellate  Jurisdiction.  —  A  Court  of  Appellate  Juris- 
diction has  no  power  to  hear  a  case  when  it  first  arises.  It 
can  only  review  the  decision  of  a  lower  court  when  such  deci- 
sion is  brought  before  it  for  determination.  The  taking  of  a 
case  from  a  lower  court  to  a  higher  one  is  called  an  appeal. 

Original  and  Appellate  Jurisdiction.  —  There  are  other  courts 
that  have  in  some  cases  original  and  in  others  appellate  juris- 
diction ;  that  is,  they  have  jurisdiction  to  hear  appeals  from  some 


Civil  Courts 


334  COURTS  AND   THEIR  JURISDICTION 

lower  court  or  courts,  and  they  can  also  try  certain  cases  in  the 
capacity  of  courts  of  original  jurisdiction. 

Courts  of  Record  and  Not  of  Record.  —  Courts  are  known  as 
Courts  of  Record  and  Courts  Not  of  Record.  Courts  of  record 
are,  as  their  name  implies,  those  which  are  required  by  law  to 
keep  a  record  of  their  proceedings,  this  record  being  kept  on  file 
in  some  safe  place  for  future  reference.  Courts  Not  of  Record, 
on  the  other  hand,  have  no  record  of  their  proceedings  preserved. 

Civil  and  Criminal  Courts.  —  Courts  are  either  Civil  or  Crimi- 
nal. Civil  courts  hear  cases  in  which  the  rights  and  liabilities 
of  individuals  towards  each  other  are  in  dispute.  A  civil  action 
is  one  which  seeks  the  establishment,  recovery,  or  redress  of 
private  rights,  while  a  criminal  action  has  for  its  purpose  the 
protection  of  the  community  against  those  whose  acts  would 
endanger  it.  Criminal  courts  are  those  which  administer  criminal 
law  and  hear  and  determine  criminal  actions. 

Common  Law  and  Equity  Courts.  —  Civil  Courts  may  be  either 
Common  Law  Courts  or  Equity  Courts.  The  distinction  between 
the  common  law  court  and  the  equity  or  chancery  court  was  in 
former  times  well  defined,  a  different  set  of  judges  presiding  over, 
and  an  entirely  different  system  prevailing  in,  each  court.  But 
the  line  of  distinction  is  in  most  jurisdictions  less  pronounced 
now  than  formerly,  and  in  New  York  State  and  many  of  the 
other  states  the  same  judge  presides  in  both  a  common  law  and 
an  equity  court ;  at  one  term  of  court  hearing  common  law  cases 
and  at  another  equity  cases. 

General  and  Special  Jurisdiction.  —  Courts  of  General  Jurisdic- 
tion are  those  in  which  it  is  assumed,  unless  the  contrary  is 
shown,  that  they  have  jurisdiction  to  hear  the  cases  before  them. 
In  such  a  court  the  fact  that  it  has  jurisdiction  does  not  have  to 
be  expressly  pleaded  or  proved,  while  in  the  case  of  a  court  of 
inferior  or  special  jurisdiction,  the  jurisdiction  of  the  court  over 
the  case  in  question  is  not  presumed,  but  must  be  especially  set 
out  in  the  pleadings. 

Federal  Courts.  —  The  courts  of  the  United  States  are  called 
Federal  courts  and  are  empowered  to  hear  cases  arising  under  the 
United  States  Constitution,  laws,  and  treaties.    The  Constitution 


COURTS  AND   THEIR  JURISDICTION  335 

provides  that  the  judicial  power  of  the  United  States  shall  be 
vested  in  one  Supreme  Court  and  in  such  inferior  courts  as 
Congress  may  from  time  to  time  establish.  In  pursuance  of 
this  authority,  Congress  has  established,  in  addition  to  the  Su- 
preme Court,  several  inferior  courts  which  are  known  as  the 
Circuit  Court  and  the  District  Court. 

The  Federal  courts  have  jurisdiction  only  in  those  cases  in 
which  it  is  expressly  conferred  upon  them  by  the  Constitution, 
and  by  Congress  under  the  power  granted  to  it  by  the  Constitu- 
tion. This  jurisdiction  extends  to  all  cases  arising  under  the 
United  States  Constitution,  the  laws  of  the  United  States  and 
treaties  made  under  their  authority,  and  all  cases  affecting  am- 
bassadors, public  ministers,  and  consuls ;  to  all  cases  of  admi- 
ralty and  marine  law,  which  includes  all  things  done  upon  and 
relating  to  the  seas  and  all  transactions  in  connection  with  com- 
merce and  navigation  and  to  damages  for  injuries  upon  the  high 
seas  and  the  navigable  lakes  and  rivers  of  the  United  States. 
They  also  have  jurisdiction  of  controversies  in  which  the  United 
States  is  a  party,  and  of  cases  between  two  or  more  states, 
between  a  state  and  citizens  of  another  state,  between  citizens 
of  different  states,  between  citizens  of  the  same  state  claiming 
land  under  the  grant  of  a  different  state,  and  between  a  state  or 
its  citizens  and  foreign  states,  citizens,  or  subjects. 

District  Court.  —  The  United  States  is  divided  into  districts 
each  comprising  one  state  or  less.  Each  of  the  following  states 
constitutes  one  district :  Arizona,  Alaska,  Colorado,  Connecticut, 
Delaware,  Idaho,  Indiana,  Kansas,  Maine,  Maryland,  Massachu- 
setts, Minnesota,  Montana,  Nebraska,  Nevada,  New  Hampshire, 
New  Jersey,  New  Mexico,  North  Dakota,  Oklahoma,  Oregon, 
Rhode  Island,  South  Carolina,  South  Dakota,  Utah,  Vermont, 
Washington,  and  Wyoming. 

The  following  states  contain  two  districts  each :  Arkansas, 
California,  Florida,  Georgia,  Illinois,  Iowa,  Kentucky,  Louisiana, 
Michigan,  Mississippi,  Missouri,  North  Carolina,  Ohio,  Virginia, 
West  Virginia,  and  Wisconsin ;  and  the  following,  three  districts  : 
Alabama,  Pennsylvania,  and  Tennessee;  while  New  York  and 
Texas  are  each  divided  into  four. 


336  COURTS  AISTD   THEIR  JURISDICTION 

A  judge  is  appointed  to  preside  in  each  district.  The  district 
judge  receives  a  salary  of  |56ooo  per  year. 

The  district  court  has  jurisdiction  of  all  crimes  and  offenses 
cognizable  under  the  authority  of  the  United  States  and  com- 
mitted within  the  particular  district  or  upon  the  high  seas, 
except  where  the  punishment  is  death ;  all  causes  of  action 
arising  under  the  postal  and  bankruptcy  laws ;  all  cases  of 
admiralty  and  marine  questions,  and  many  other  cases. 

For  the  relief  of  the  court,  and  the  convenience  of  the  parties 
in  each  district,  a  number  of  referees  in  bankruptcy  are  ap- 
pointed. These  referees  hear  the  cases  and  report  to  the  dis- 
trict judge,  who  grants  or  refuses  the  final  discharge. 

Circuit  Court.  —  The  United  States  is  divided  into  nine  cir- 
cuits as  follows :  — 

First  Circuit :  Maine,  Massachusetts,  New  Hampshire,  and 
Rhode  Island. 

Second :  Connecticut,  New  York,  and  Vermont. 

Third  :  Delaware,  New  Jersey,  and  Pennsylvania. 

Fourth  :  Maryland,  North  Carolina,  South  Carolina,  Virginia, 
and  West  Virginia. 

Fifth  :  Alabama,  Florida,  Georgia,  Louisiana,  Mississippi,  and 
Texas. 

Sixth  :  Kentucky,  Michigan,  Ohio,  and  Tennessee. 

Seventh  :  Illinois,  Indiana,  and  Wisconsin. 

Eighth :  Arkansas,  Colorado,  Indian  and  Oklahoma  Terri- 
tories, Iowa,  Kansas,  Minnesota,  Missouri,  Nebraska,  New 
Mexico,  North  Dakota,  South  Dakota,  Utah,  and  Wyoming. 

Ninth :  Alaska,  Arizona,  California,  Idaho,  Montana,  Ne- 
vada, Oregon,  and  Washington. 

The  chief  justice  and  the  associate  justices  of  the  Supreme 
Court  are  allotted  to  the  circuits,  in  which  they  may  sit  as  circuit 
justices.  Two  or  more  circuit  judges  are  also  appointed  for 
each  circuit,  and  they  have  the  same  power  in  the  court  as  the 
Supreme  Court  justice  allotted  to  the  circuit.  The  circuit  court 
judge  receives  a  salary  of  $7000  per  year.  In  the  first  and 
fourth  circuits  there  are  two  circuit  judges,  in  the  second  and 
eighth  four,  and  in  each  of  the  other  circuits  three. 


COURTS  AND   THEIR  JURISDICTION  337 

A  circuit  court  may  be  held  by  the  Supreme  Court  justice  of 
the  circuit,  by  a  circuit  judge  of  the  circuit,  or  by  one  of  the 
district  judges  of  the  district. 

The  circuit  court  has  original  jurisdiction  of  cases  in  equity 
or  common  law  where  the  amount  in  dispute  exceeds  ^2000  and 
the  question  arises  under  the  United  States  Constitution,  laws, 
or  treaties ;  also  in  controversies  in  which  the  United  States  is 
a  party,  and  in  disputes  between  citizens  of  different  states.  It 
also  has  jurisdiction  when  the  amount  involved  exceeds  the  sum 
of  $20QO  and  the  controversy  arises  between  citizens  of  the 
same  state  over  a  claim  for  land  granted  by  a  different  state. 
Its  jurisdiction  includes  all  crimes  arising  under  the  authority  of 
the  United  States,  having  concurrent  jurisdiction  with  the  dis- 
trict court  of  the  crimes  within  its  jurisdiction,  and  it  has  juris- 
diction of  patent  and  copyright  cases  and  of  questions  concerning 
Indian  lands. 

Circuit  Court  of  Appeals.  —  The  circuit  court  as  well  as  the 
district  court  has  only  original  jurisdiction,  all  appeals  from 
either  court  being  taken  to  the  circuit  court  of  appeals,  which 
consists  of  three  judges,  the  presence  of  at  least  two  being 
necessary  to  constitute  a  quorum.  The  Supreme  Court  judge 
assigned  to  the  circuit  and  the  district  judges  within  the  circuit 
are  competent  to  sit  as  judges  of  the  circuit  court  of  appeals. 
This  court  has  appellate  jurisdiction  only  and  hears  appeals 
from  both  the  circuit  and  the  district  courts.  It  hears  all  ap- 
peals from  these  courts  except  in  a  few  special  cases,  which  will 
be  mentioned  later,  where  appeals  are  taken  directly  to  the 
Supreme  Court  of  the  United  States, 

Supreme  Court,  —  The  Supreme  Court  consists  of  the  chief 
justice  and  eight  associate  justices.  The  chief  justice  receives 
a  salary  of  1^13,000  and  the  associate  justices  $12,500  per  year. 

This  court  has  both  original  and  appellate  jurisdiction,  its 
original  jurisdiction  extending  over  all  proceedings  brought 
against  ambassadors,  public  ministers,  consuls,  and  their  fami- 
lies, and  over  all  controversies  of  a  civil  nature  in  which  a  state 
is  a  party. 

It  has  appellate  jurisdiction  to  hear  appeals  from  the  district 

COM.  LAW  —  22 


338  COt/RTS  AMD  THEIR  jC/RlSDICT/OAr 

or  circuit  courts  in  all  cases  where  the  jurisdiction  of  the  court 
is  in  question,  cases  of  conviction  of  a  capital  crime,  cases 
that  involve  the  construction  or  application  of  the  United 
States  Constitution,  and  cases  in  which  the  constitutionality  or 
validity  of  any  law  of  the  United  States  or  any  treaty  made 
under  it  is  drawn  into  question,  also  a  few  other  important  ques- 
tions. Of  the  less  important  cases  the  determination  of  the 
circuit  court  of  appeals  is  final,  but  in  the  more  important  mat- 
ters and  those  in  which  a  large  amount  is  involved  an  appeal 
may  be  taken  from  that  court  to  the  Supreme  Court. 

State  Courts.  —  While  the  federal  or  United  States  courts 
above  enumerated  deal  only  with  certain  specific  cases  over 
which  they  are  given  jurisdiction  by  the  Constitution,  the  great 
mass  of  questions  not  specifically  placed  within  the  jurisdiction 
of  these  federal  courts  is  within  the  jurisdiction  of  the  state 
courts. 

Justice  Court.  —  The  systems  of  courts  in  the  different  states 
differ  somewhat,  but  in  the  more  important  features  are  essen- 
tially the  same,  the  lowest  court  being  the  Justice  Court,  presided 
over  by  the  justice  of  the  peace.  In  New  York  State  this  is  a 
town  office,  the  justice  being  elected  by  the  people  every  four 
years.  It  is  a  court  not  of  record,  and  has  original  jurisdiction 
only.  It  hears  both  civil  and  criminal  cases  and  is  of  limited  or 
special  jurisdiction. 

In  the  larger  cities  there  are  two  modifications  of  this  court, 
one  branch  hearing  civil  cases  and  being  known  as  the  Munici- 
pal or  City  Court,  and  the  other  branch  dealing  with  the  criminal 
cases  and  known  as  the  Police  or  Magistrate's  Court. 

The  jurisdiction  of  the  justice  court  is  over  the  minor  or 
more  trivial  cases,  and  includes  the  punishment  of  petty  offenses 
which  it  is  not  thought  necessary  to  bring  before  the  higher 
courts.  In  civil  cases  it  has  jurisdiction  when  the  amount  in- 
volved does  not  exceed  ;^2CX).  It  has  no  jurisdiction  when 
the  title  to  real  property  is  involved.  In  its  criminal  branch  it 
has  exclusive  jurisdiction  of  certain  prescribed  misdemeanors, 
such  as  petit  larceny,  assault  in  the  third  degree,  malicious 
mischief,  etc. 


COURTS  AND   THEIR  JURISDICTION  339 

By  way  of  definition  of  the  term  "  misdemeanor  "  it  may  be 
said  that  crimes  are  classified  as  felonies  and  misdemeanors.  A 
felony  is  a  crime  punishable  by  either  death  or  imprisonment  in 
a  state's  prison.     All  other  crimes  are  misdemeanors. 

County  Court.  —  In  New  York  and  many  other  states,  the 
court  next  in  importance  is  the  County  Court.  The  jurisdiction 
of  this  court  is  limited  to  the  county,  and  the  judge  is  known 
as  the  county  judge.  It  is  a  court  of  record,  having  jurisdiction 
of  both  civil  and  criminal  cases,  and  having  both  original  and 
appellate  jurisdiction.  Its  jurisdiction  is  special  or  limited, 
being  confined  exclusively  to  those  cases  in  which  jurisdiction 
is  expressly  conferred  upon  it. 

In  civil  matters  it  has  jurisdiction  to  foreclose  a  lien  or  mort- 
gage on  real  property  when  the  mortgage  does  not  exceed  $1000 
and  the  realty  is  within  the  county.  It  has  jurisdiction  in  an 
action  in  which  a  judgment  for  a  sum  of  money  only  is  de- 
manded, the  amount  not  to  exceed  ^2cxdo,  and  the  defendant  or 
defendants  reside  within  the  county.  It  also  has  jurisdiction  of 
the  care  and  custody  of  the  property  of  incompetent  persons, 
such  as  lunatics,  habitual  drunkards,  etc.  In  criminal  cases  it 
has  jurisdiction  over  all  crimes  committed  within  the  county  and 
not  punishable  with  death,  except  the  minor  criminal  cases  over 
which  the  justice  court  has  exclusive  jurisdiction. 

The  county  court  has  appellate  jurisdiction  to  hear  appeals 
from  the  justice  court  in  certain  cases. 

Surrogate's  Court. — This  court,  or  as  it  is  known  in  some  states, 
the  Probate  Court,  has  to  deal  with  the  settlement  of  the  estates 
of  deceased  persons,  the  probating  of  wills,  and  the  protection 
of  minor  children,  and  with  all  matters  pertaining  to  the  dispo- 
sition of  the  property  of  deceased  persons. 

Circuit  Court  or  Supreme  Court.  —  In  some  states  this  court  is 
called  the  District  Court,  and  in  others  the  Court  of  Common 
Pleas.  In  New  York  State  it  is  called  the  Supreme  Court, 
which  name  may  be  somewhat  misleading,  for  instead  of  being 
the  highest  court,  as  its  name  would  seem  to  indicate,  it  is  a 
court  of  original  jurisdiction.  It  is  a  court  of  record  and  has 
general  jurisdiction.      In  this  state  it  is  properly  divided  into 


340  COURTS  AND   THEIR  JURISDICTION 

these  branches :  Trial  Term,  Equity  Term,  Special  Term,  and 
Appellate  Division.  For  the  purposes  of  this  court  the  state  is 
divided  into  eight  districts,  in  each  of  which  there  are  a  number 
of  judges  elected  by  the  people.  For  the  purposes  of  the  appel- 
late division  of  the  supreme  court  the  state  is  divided  into  four 
departments. 

Trial  Term  is  a  term  of  this  court  which  convenes  for  the  pur- 
pose of  trying  both  civil  and  criminal  cases.  It  may  convene 
with  or  without  a  jury. 

Equity  Term  convenes  for  the  purpose  of  trying  equity  cases. 

Special  Term.  In  special  term  one  judge  sits  without  a  jury 
for  the  purpose  of  hearing  arguments  and  granting  motions 
having  principally  to  do  with  the  practice  of  the  court. 

Appellate  Division.  This  court  is  composed  of  five  judges  in 
each  department,  except  in  the  department  which  includes  New 
York  City,  where  there  are  seven.  It  has  appellate  jurisdiction 
to  hear  appeals  of  both  civil  and  criminal  cases  from  the  county, 
surrogate's,  and  supreme  courts 

Court  of  Appeals.  —  The  court  of  last  resort  in  the  state  of 
New  York  is  known  by  tne  above  title,  but  in  the  majority  of 
the  states  this  court  is  known  as  the  Supreme  Court.  It  has 
exclusively  appellate  jurisdiction.  In  New  York  State  it  is  com- 
posed of  one  chief  judge  and  six  associate  judges.  This  court 
never  hears  the  evidence  in  a  case,  but  merely  hears  appeals 
from  the  appellate  division  of  the  supreme  court.  Not  all 
cases  can  be  taken  before  this  court,  the  decision  of  the  appel- 
late division  of  the  supreme  court  being  final  in  many  of  them. 

It  reviews  questions  of  fact  in  a  case  only  when  the  judgment 
is  death.     In  all  other  cases  it  reviews  questions  of  law. 

Court  of  Claims.  —  From  the  fact  that  a  state  is  supreme  and 
can  not  be  sued  by  its  citizens,  there  arises  a  demand  for  some 
tribunal  to  hear  and  determine  claims  against  the  state,  or  on 
the  part  of  the  state  against  the  citizen.  To  meet  this  necessity 
a  State  Board  of  Claims  has  been  established,  consisting  of  three 
commissioners  appointed  by  the  governor.  This  court  convenes 
at  various  stated  times,  and  hears  and  determines  any  of  these 
claims  which  may  be  brought  before  it. 


i 


COURTS  AND   THEJR  JURISDICTION-  34 1 

Reference.  —  A  Referee  is  a  person  appointed  by  the  court  to 
hear  the  evidence  in  a  case  and  to  report  thereon  to  the  court. 
It  is  customary  for  the  court  to  grant  a  reference  when  the  case 
requires  the  examination  of  a  long  account.  In  some  other 
cases  a  reference  may  be  had  either  upon  motion  of  the  parties 
or  in  the  discretion  of  the  judge. 

A  case  involving  a  long  account  is  tried  before  a  referee 
because  of  the  difficulty  the  jurors  would  have  in  carrying  in 
their  minds  the  numerous  items  involved  therein  and  the  great 
delay  to  which  the  court  would  be  subjected  on  account  of  the 
expenditure  of  time  required  to  hear  cases  of  this  character.  A 
referee  hears  the  case  in  the  same  manner  as  a  judge,  and  has 
the  same  power  to  preserve  order  and  grant  adjournments. 

QUESTIONS   ON   COURTS 

1 .  For  what  purpose  are  courts  established  ? 

2.  What  is  the  jurisdiction  of  a  court  ? 

3.  What  is  the  effect  of  a  decision  of  a  court  not  having  jurisdiction  of 
the  question  ? 

4.  Name  and  define  the  two  different  classes  of  jurisdiction. 

5.  Name  the  different  classificatioas  of  the  courts  of  the  United  States 
and  of  the  several  states. 

6.  What  is  a  court  of  original  jurisdiction  ?    Of  appellate  jurisdiction  ? 

7.  Define  courts  of  record  ;  courts  not  of  record. 

8.  Define  civil  and  criminal  courts  ;  common  law  and  equity. 

9.  Distinguish  between  the  courts  of  general  jurisdiction  and  those  of 
special  jurisdiction. 

10.  How  are  the  courts  of  the  United  States  established,  and  over  what 
questions  have  they  jurisdiction  ? 

11.  Name  the  different  United  States  courts,  and  describe  each. 

12.  What  is  the  lowest  state  court  ?    Describe  it,  and  state  its  jurisdiction. 

13.  Describe  the  county  court  and  its  jurisdiction. 

14.  Des'^ribe  the  surrogate's  court  and  its  jurisdiction. 

15.  Describe  the  circuit  or  supreme  court  and  its  jurisdiction. 

16.  Name  and  describe  the  four  branches  of  the  supreme  or  circuit  court 
in  the  state  of  New  Yoric. 

17.  Mention  and  describe  the  highest  state  court  and  its  jurisdiction. 

jS.  What  is  the  court  of  claims,  and  over  what  questions  does  it  have 
jurisdiction  .' 

19.    How  is  a  referee  appointed  and  in  what  cases  ? 


PLEADING   AND    PRACTICE 

We  have  learned  that  a  system  of  courts  is  established  in 
each  state  as  well  as  in  the  United  States.  To  enable  the  courts 
to  conduct  their  business  in  an  orderly  manner,  certain  rules  of 
practice  are  prescribed  which  must  be  observed  by  those  desir- 
ing relief  in  these  courts. 

Action.  —  When  a  person  desires  the  relief  afforded  by  the 
courts,  he  institutes  an  action  or  suit.  An  action  is  defined  as 
the  legal  and  formal  demand  of  one's  rights  made  upon  another 
person  or  party  and  insisted  upon  in  a  court  of  justice. 

Parties.  —  In  an  action  at  law  it  is  necessary  that  there  be 
two  or  more  parties.  The  party  who  brings  the  action  is  known 
as  the  plaintiff,  and  the  one  against  whom  it  is  brought,  as  the 
defendant.  In  a  criminal  action  the  plaintiff  is  the  state  or 
the  people  of  the  state,  and  the  defendant  is  the  one  accused 
of  the  crime.  The  same  person  can  not  be  both  plaintiff  and 
defendant.  A  party  in  all  civil  cases  must  be  competent  to 
contract ;  but  when  incompetent,  as  in  the  case  of  an  infant  or 
lunatic,  he  may  bring  suit  through  a  person  appointed  for  that 
purpose  and  known  as  a  guardian. 

Summons.  —  An  action  is  commenced  by  the  service  of  a 
notice  upon  the  defendant,  this  notice  being  called  a  summons. 
The  summons  is  in  some  jurisdictions  issued  by  the  judge  or 
clerk  of  the  court,  while  in  other  jurisdictions  it  may  be  issued 
by  the  attorney  for  the  plaintiff. 

In  New  York  State  if  George  Elliott  of  Buffalo,  New  York, 
should  bring  an  action  in  the  Supreme  Court  against  Charles 
Phillips  of  the  same  place  the  summons  would  read  as 
follows : — 

34a 


PLEADING  AND  PRACTICE  343 

SUPREME  COURT,  COUNTY  OF   ERIE 
George  Elliott,  Plaintiff, 

V. 

Charles  Phillips,  Defendant. 
To  the  above-named  Defendant: 

You  are  hereby  sumnioned  to  answer  the  complaint  in  this  action,  and  to 
serve  a  copy  of  your  answer  on  the  plaintiff's  attorney  within  twenty  days 
after  the  service  of  this  summons,  exclusive  of  the  day  of  service ;  and,  in  case 
of  your  failure  to  appear  or  answer,  judgment  will  be  taken  against  you  by 
default  for  the  relief  demanded  in  the  complaint. 

Trial  desired  in  the  county  of  Erie. 

Dated  this  loth  day  of  February,  1904, 

Herman  J.  Westwood, 

Attorney  for  plaintiff. 
794  Ellicott  Square, 

Buffalo,  New  York. 

This  summons  must  be  served  personally  upon  the  defendant, 
either  by  a  sheriff  or  a  constable,  or  by  a  person  of  suitable  age. 
The  laws  expressly  provide  in  a  few  cases  that  the  summons 
may  be  served  upon  the  defendant  by  advertising  it  in  a  news- 
paper, but  this  is  only  in  case  the  defendant  is  not  within  the 
state,  or  if  within  the  state  he  can  not  be  located. 

Pleadings.  —  After  an  action  or  suit  has  been  commenced  by 
the  service  of  a  summons,  the  parties  must  serve  their  pleadings 
within  a  certain  prescribed  time.-  These  pleadings  are  the 
formal  allegations  of  the  parties  by  which  both  plaintiff  and 
defendant  present  to  the  court  and  to  each  other  their  respective 
versions  of  the  question  in  dispute. 

Complaint.  —  The  complaint,  which  is  the  first  pleading  in  a 
case,  and  is  in  some  states  called  the  petition  or  declaration, 
consists  of  a  statement  of  the  cause  of  action  which  the  plaintiff 
sets  forth  as  his  reason  for  seeking  the  aid  of  the  court  against 
the  defendant.  Under  the  old  common  law  the  forms  of  plead- 
ings were  very  technical,  but  under  the  modern  form  of  proce- 
dure they  are  required  only  to  set  forth  the  facts  in  a  clear  and 
concise  manner.  The  complaint  is  commonly  served  with  the 
summons,  but  may  be  served  later.    After  the  complaint  has 


344  PLEADING  AND  PRACTICE 

been  served  upon  the  defendant  or  filed  with  the  court,  as  the 
rules  of  the  particular  court  may  require,  it  is  then  necessary 
for  the  defendant  within  a  certain  number  of  days  (usually 
twenty)  to  file  or  serve  a  statement  of  the  reasons  why  he 
should  not  comply  with  the  demands  of  the  plaintiff.  If  such  a 
statement  is  not  filed,  the  plaintiff  is  given  judgment  against  the 
defendant  by  default.  The  pleading  which  is  filed  by  the  de- 
fendant may  be  either  an  answer  or  a  demurrer. 

Answer.  —  The  answer,  or  plea  as  it  is  sometimes  called,  is  a 
statement  in  concise  form  of  the  defendant's  defense  to  the 
matters  set  up  in  the  complaint.  The  answer  may  deny  the 
claim  of  the  plaintiff,  or  it  may  admit  it  and  set  up  other  facts 
by  way  of  counterclaim  or  set-off. 

To  illustrate,  the  plaintiff  may  sue  for  $ioo,  which  he  alleges 
in  his  complaint  the  defendant  owes  him  for  the  purchase  price 
of  a  horse  sold  by  plaintiff  to  defendant.  The  defendant  in  his 
answer  may  allege  that  he  did  not  purchase  the  horse,  but 
merely  took  it  to  keep  for  its  use,  and  this  would  be  a  denial. 
Again,  he  may  admit  purchasing  the  horse  for  j^ioo,  but  allege 
that  he  worked  for  defendant  three  months  at  $50  per  month, 
and  that  his  wages  had  not  been  paid,  and  ask  that  this  be  an 
offset  against  the  price  of  the  horse,  and  that  he,  the  defendant, 
be  given  a  judgment  for  the  balance  of  1^50.  This  defense  con- 
stitutes a  counterclaim  or  set-off. 

Reply.  —  When  a  counterclaim  is  alleged,  new  facts,  are 
brought  up  and  it  is  necessary  for  the  plaintiff,  if  he  wishes 
to  deny  them,  to  make  a  reply,  or  replication,  which  is  really  the 
plaintiff's  reply  or  answer  to  the  neW>Lacts.  set  forth  by  the 
defendant. 

Demurrer.  —  The  defendant  may  consider  that  the  facts  set 
up  in  the  plaintiff's  complaint,  even  if  true,  do  not  constitute  a 
sufficient  case  in  law  against  him,  and  for  this  reason  it  does  not 
require  that  a  defense  be  interposed,  therefore  he  demurs  to  the 
plaintiff's  complaint.  By  demurring  he  in  effect  says,  admitting 
that  all  the  plaintiff  sets  forth  in  his  complaint  is  true,  still  he  is 
not  entitled  to  recover.  The  question  on  the  demurrer  must  be 
argued  before  the  judge,  and  if  the  demurrer  is  sustained,  the 


PLEADING  AND  PRACTICE  345 

plaintiff  must  correct  or  amend  his  complaint  or  he  fails  in  his 
action.  If  the  demurrer  is  overruled,  the  defendant  must  answer 
or  the  case  will  go  against  him,  A  demurrer  may  also  be  inter- 
posed to  an  answer  or  a  reply  in  the  same  manner  as  to  the 
complaint. 

Trial.  —  After  the  pleadings  are  served  the  case  comes  to 
trial.  A  trial  is  held  before  the  court,  consisting  of  the  judge 
alone  in  some  cases  and  in  others  of  a  judge  and  a  jury.  A 
jury  is  a  body  of  men,  usually  twelve,  who  are  brought  together 
to  hear  a  case  and  sworn  to  decide  the  same  according  to  the 
evidence  brought  before  them. 

Questions  of  Law  or  of  Fact.  —  Questions  which  give  rise  to  a 
trial  may  be  questions  of  law  or  questions  of  fact.  In  the  former 
the  facts  of  the  case  are  admitted,  and  the  question  to  be  decided 
is  the  application  of  the  law  to  these  facts.  This  is  a  question 
for  the  court  and  is  tried  without  a  jury.  A  question  of  fact 
arises  when  the  testimony  of  the  witnesses  differs  and  the  true 
state  of  facts  remains  to  be  detecmined.  Questions  of  fact  are 
generally  tried  before  a  jury.  Every  criminal  case  may  be  tried 
before  a  jury  if  the  defendant  demands  a  jury  trial.  In  most 
cases  an  equit^'  cause  is  tried  before  the  judge  without  a  jury. 
All  cases  involving  simply  a  question  of  law  are  tried  before  a 
judge  without  a  jury.  It  may  be  said  that  the  law  is  to  be 
decided  by  the  judge,  and  the  facts  by  the  jury.  The  jurors 
are  sworn  to  determine  the  case  according  to  the  evidence,  and 
the  question  arises  as  to  what  constitutes  the  evidence. 

Evidence.  —  We  find  that  the  evidence  consists  of  the  testi- 
mony of  persons  who  now  something  about  the  facts  and  are 
sworn  to  tell  the  truth.  These  persons  are  known  as  witnesses. 
Written  documents  and  papers  pertaining  to  the  case  are  also 
admitted  as  evidence. 

Subpoena.  —  In  order  to  procure  the  attendance  of  the  wit- 
nesses at  the  trial  of  a  case  the  court  issues  an  order,  called  a 
subpoena,  commanding  them  to  appear  at  a  certain  time  to  give 
evidence  in  the  case,  and  in  default  of  their  appearance  they  are 
subject  to  a  fine  for  contempt  of  court.  Refusal  to  testify  when 
called  as  a  witness  is  also  contempt  of  court. 


346  PLEADING  AND  PRACTICE 

Deposition.  —  When  a  necessary  witness  is  outside  of  the 
state,  or,  in  the  justice  court,  outside  of  the  county  or  an  adjoin- 
ing county,  it  is  not  within  the  power  of  the  court  to  compel 
his  attendance,  therefore  statutes  have  been  passed  allowing  his 
testimony  to  be  taken  in  a  certain  prescribed  way  before  a 
notary  public  or  other  officer,  who  reduces  the  testimony  to 
writing  and  returns  it  to  the  court.  The  opposing  party  must 
have  notice  of  the  time  and  place  of  the  taking  of  the  deposi- 
tion and  also  an  opportunity  to  question  the  witness. 

Lawyers.  —  The  case  for  both  the  plaintiff  and  the  defendant 
is  conducted  by  officers  of  the  court  known  as  lawyers.  The 
lawyer  prepares  the  pleadings  for  his  side  of  the  case,  presents 
the  case  to  the  court,  and  questions  the  witnesses. 

Verdict.  — After  the  jury  has  heard  the  witnesses  for  plaintiff 
and  defendant,  it  weighs  the  evidence  on  both  sides  of  the  ques- 
tion and  arrives  at  a  decision  as  to  the  party  in  the  right.  This 
decision  is  called  the  verdict.  In  order  to  render  a  verdict  the 
jurors  must  all  agree.  If,  after  a  reasonable  time,  they  have 
failed  to  agree,  they  are  dismissed,  and  a  new  trial  is  held  before 
another  jury. 

Judgment.  —  The  verdict  of  a  jury  is  but  a  determination  of 
the  facts  of  a  case.  It  is  for  the  judge  to  give  the  judgment, 
which  is  the  official  decision  of  the  court  upon  the  respective 
rights  and  claims  of  the  parties  to  the  action.  Thus  in  a  suit  for 
damages  against  a  railway  company  for  running  over  plaintiff's 
horse,  the  jury  might  find  that  the  plaintiff  ought  to  recover 
$ioo  from  the  defendant,  and  bring  in  its  verdict  to  that  effect. 
Upon  this  verdict  the  judge  decrees  that  the  defendant  shall 
pay  this  amount  to  the  plaintiff  and  so  gives  the  judgment  of 
the  court  to  the  plaintiff  for  $ioo  dollars  and  costs.  The  costs 
are  an  allowance  given  to  the  successful  party  to  compensate 
him  for  his  expenses  in  conducting  the  case.  In  a  criminal  mat- 
ter the  jury  finds  the  defendant  guilty,  and  the  judge  pronounces 
the  penalty  or  punishment. 

Execution.  —  After  the  judgment  of  the  court  has  been  ren- 
dered, the  party  against  whom  the  damages  are  adjudged  may 
not  voluntarily  pay  therp.     Jp  such  ^-P  event,  the  law  provides 


PLEADING  AND  PRACTICE  347 

a  method  of  procedure  called  an  execution,  which  is  a  command 
issued  by  the  court  to  one  of  its  officers,  either  a  sheriff,  consta- 
ble, or  marshal,  authorizing  and  requiring  him  to  collect  the 
amount  named  as  damages,  and  if  not  paid  to  take  certain  prop- 
erty of  the  person  against  whom  the  judgment  is  given,  sell  it, 
and  apply  the  proceeds  upon  the  judgment. 

Levy  and  Sale.  —  The  taking  of  the  property  under  the  au- 
thority of  the  execution  is  called  a  levy.  The  property  after 
being  levied  upon  is  advertised  by  the  officer  and  sold  at  public 
sale  to  the  highest  bidder. 

Exemption.  —  The  sheriff  or  officer  can  levy  upon  any  prop- 
erty owned  by  the  judgment  debtor  except  certain  articles  which 
he  is  allowed  by  law  to  claim  as  exempt  from  execution  and  sale. 
The  exemptions  differ  in  the  different  states  and  are  generally 
more  liberal  to  a  married  man  or  one  who  supports  a  family 
than  to  a  single  man.  The  exemptions  ordinarily  consist  of 
clothing,  household  articles  of  a  certain  value,  etc.,  and  are  set 
forth  in  detail  in  the  Appendix  at  page  359. 

New  Trial.  —  After  the  judgment  has  been  given,  the  unsuc- 
cessful party  may  within  a  certain  time  move  for  a  new  trial, 
either  for  the  reason  that  he  has  discovered  some  new  evidence, 
or  because  of  some  error  of  the  judge  in  the  first  trial.  If  the 
judge  can  be  convinced  that,  during  the  trial,  he  has  made  a 
material  error  or  that  the  defeated  party  really  has  discovered  new 
evidence  that  is  material  to  his  case,  the  judge  may,  at  his  dis- 
cretion, order  a  new  trial.  If  a  new  trial  is  denied,  the  defeated 
party  has  no  recourse  but  to  pay  the  judgment  or  take  an  appeal. 

Appeal.  —  The  party  dissatisfied  with  the  judgment  of  the 
trial  court  may  take  an  appeal  to  a  higher  court  by  fulfilling  cer- 
tain prescribed  conditions,  which  in  most  cases  consist  in  giving 
an  undertaking  to  pay  the  costs  if  the  decision  of  the  trial  court 
is  affirmed. 

The  appeal  is  generally  on  questions  of  law  alone,  the  deci- 
sion of  the  trial  court  on  questions  of  fact  being  final.  The 
appellate  court  hears  the  arguments  of  the  lawyers  on  each  side, 
and  it  may  then  aff.rm  the  decision  of  the  trial  court,  or  it  may 
reverse  it  and  send  the  case  back  for  a  new  trial. 


34S  PLEADING  AND  PRACTICE 

When  the  case  has  been  taken  to  the  highest  appellate  court 
to  which  a  case  of  its  kind  can  be  carried,  and  this  last  court 
affirms  the  judgment  of  the  trial  court,  the  case  is  finally  deter- 
mined. 

Supplementary  Proceedings,  —  In  case  the  sheriff  or  other 
officer  intrusted  with  the  execution  is  unable  to  collect  the  money 
or  find  property  sufficient  to  satisfy  it,  he  may  return  the  execu- 
tion with  his  certificate  that  it  is  unsatisfied.  The  party  who 
obtained  the  judgment,  and  who  is  called  the  judgment  creditor, 
may  then  apply  to  the  judge  for  an  order  to  examine  the  judg- 
ment debtor  in  reference  to  his  property.  This  order  of  the 
judge  requires  the  judgment  debtor  to  appear  before  a  referee 
appointed  by  the  court  and  answer  questions  which  may  be 
asked  him  in  reference  to  his  property.  The  referee  also  has 
power  to  subpoena  other  witnesses  and  to  adjourn  the  proceed- 
ings from  time  to  time.  When  the  examination  is  completed 
the  referee  reports  the  evidence  to  the  judge  who  appointed  him, 
and  if  it  is  found  that  the  judgment  debtor  has  any  property 
which  is  not  exempt,  he  is  ordered  to  turn  it  over  to  the  proper 
officer. 

Replevin.  —  This  is  an  action  brought  to  recover  the  posses- 
sion of  certain  articles  of  personal  property  which  have  been 
wrongfully  taken,  or,  if  rightfully  taken,  are  being  wrongfully 
withheld.  By  giving  a  bond,  the  plaintiff  can  have  the  property 
taken  from  the  defendant  and  held  in  the  custody  of  an  officer 
until  the  action  is  determined.  In  this  action  their  right  to  the 
possession  of  the  goods  is  the  question  in  dispute. 

Attachment.  —  In  certain  cases  the  court  will  issue  a  writ  of 
attachment,  which  is  an  order  to  the  sheriff  or  other  officers  to 
seize  certain  property  of  the  defendant  and  hold  it  as  security 
for  any  judgment  which  may  be  obtained.  This  writ  is  used 
principally  against  absconding,  concealed,  or  fraudulent  debtors. 
It  is  used  also  when  the  defendant  does  not  reside  within  the 
state,  but  the  goods  attached  are  within  it.  In  such  a  case  the 
court  gets  jurisdiction  of  the  property,  which  it  may  dispose  of 
to  satisfy  a  judgment  thereafter  obtained  in  the  action. 

Garnishment.  —  In  some  states  there  is  a  provision  in  the  law 


PLEADING  AND  PRACTICE  349 

by  which  a  person  owing  money  to  the  defendant  may  be 
brought  into  the  suit  and  ordered  not  to  pay  the  money  over  to 
the  defendant,  and  he  may  also  be  ordered  to  pay  it  into  court. 
This  procedure  is  frequently  employed  when  the  third  party 
owes  wages  to  the  defendant,  as  by  garnishment  proceedings  he* 
will  be  compelled  to  pay  over  a  part  of  the  wages  to  the  court, 
or  retain  it  to  apply  on  any  judgment  the  plaintiff  may  obtain. 

QUESTIONS   ON   PLEADING   AND   PRACTICE 

1.  Define  an  action. 

2.  How  many  parties  must  there  be  to  an  action  ? 

3.  Name  the  parties  in  an  action. 

4.  What  is  a  summons  and  how  must  it  be  served  ? 

5.  What  are  the  pleadings  in  an  action  ? 

6.  What  is  the  first  pleading  served  by  the  plaintiff? 

7.  What  is  the  first  pleading  served  by  the  defendant  ? 

8.  What  is  a  reply  ? 

9.  What  is  a  demurrer  ? 

ID.  If  the  demurrer  is  sustained,  what  effect  does  it  have  on  the  action  ? 

11.  If  the  defendant's  demurrer  to  the  plaintiff's  complaint  is  overruled, 
what  step  must  the  defendant  then  take  ? 

12.  Before  whom  is  a  trial  held  ? 

13.  Before  whom  is  a  question  of  law  tried  ? 

14.  Before  whom  is  a  question  of  fact  tried  ? 

15.  Before  whom  is  a  criminal  case  tried  ?     An  equity  case  ? 

16.  Define  witnesses. 

17.  What  is  a  subpoena,  and  what  is  its  purpose  ? 

18.  What  is  a  deposition,  and  when  is  it  allowed  ? 

19.  What  is  a  lawyer  ? 

20.  What  is  the  verdict  in  a  case  ?    The  judgment  ? 

21.  Define  execution,  levy,  and  sale. 

22.  What  are  exemptions  ? 

23.  When  and  how  may  a  new  trial  be  had  ? 

24.  What  is  an  appeal,  and  upon  what  questions  is  it  taken  ? 

25.  Describe  Supplementary  Proceedings. 

26.  What  is  a  Replevin  Action  ? 

27.  Define  Attachment. 

28.  Define  Garnishment. 


APPENDIX 

LIMITATION   OF  ACTIONS 

The  following  table  will  show  in  a  general  way  the  number  of  years  that 
must  elapse  before  a  claim  will  be  barred  by  the  statute  of  limitations  in  the 
different  states  and  territories.  Many  of  the  states  recognize  classifications 
and  subdivisions  which  it  is  not  practicable  to  include  here,  but  a  general  idea 
of  the  time  limit  can  be  obtained  from  these  columns. 


State 

Open 

Account 

Written 
Instrument 

Sealed 
Instrument 

Judgment 

Alabama          .... 

3 

6 

10 

20 

Alaska     . 

6 

6 

lO 

lO 

Arizona  . 

3 

4 

5 

5 

Arkansas 

3 

5 

5 

lO 

California 

2 

4 

4 

5 

Colorado 

6 

6 

6 

20 

Connecticut     . 

6 

6 

17 

No  limit 

Delaware 

3 

6 

20 

20 

District  of  Columbi 

a 

3 

3 

12 

12 

Florida    . 

2 

5 

20 

20 

Georgia  . 

4 

6    . 

20 

7 

Hawaiian  Islands 

6 

6 

— 

— 

Idaho 

4 

5 

5 

6 

lUinois    . 

5 

lO 

ID 

20 

Indiana  . 

6 

ID 

ID 

20 

Indian  Territory 

3 

3 

5 

lO 

Iowa 

S 

ID 

ID 

20 

Kansas    . 

3 

5 

5 

5 

Kentucky 

5 

15 

'5 

15 

351 


352 


APPENDIX 


State 

Open 
Account 

Written 
Instrument 

Sealed 
Instrument 

Judgment 

Louisiana         .... 

3 

5 

10 

10 

Maine 

6 

6 

20 

20 

Maryland 

3 

3 

12 

12 

Massachusetts 

6 

6 

20 

20 

Michigan 

6 

6 

10 

10 

Minnesota 

6 

6 

6 

ID 

Mississippi 

3 

6 

6 

7 

Missouri . 

5 

ID 

10 

ID 

Montana. 

5 

8 

8 

10 

Nebraska 

4 

5 

5 

S 

Nevada   . 

4 

4 

6 

6 

New  Hampshire 

6 

6 

20 

20 

New  Jersey     . 

6 

6 

16 

20 

New  Mexico    . 

4 

6 

6 

7 

New  York 

6 

6 

20 

20 

North  Carolina 

3 

3 

10 

10 

North  Dakota. 

6 

6 

10 

10 

Ohio 

6 

15 

IS 

IS 

Oklahoma 

3 

5 

5 

s 

Oregon    . 

6 

6 

10 

ID 

Pennsylvania  . 

6 

6 

20 

20 

Rhode  Island  . 

6 

6 

20 

20 

South  Carolina 

6 

6 

IS 

20 

South  Dakota . 

6 

6 

20 

ID 

Tennessee 

6 

6 

6 

ID 

Texas 

2 

4 

4 

10 

Utah 

4 

6 

6 

8 

Vermont . 

6 

6 

8 

8 

Virginia  . 

2-5 

5 

ID 

20 

Washington    . 

3 

6 

6 

6 

West  Virginia 

5 

10 

10 

10 

Wisconsin 

6 

6 

20 

20 

Wyoming 

8 

5 

S 

S 

i 


APPENDIX 


INTEREST  TABLE 


353 


The  following  is  a  summary  of  the  legal  rates  of  interest  prescribed  by 
statute  in  the  different  states  and  territories,  with  the  maximum  rates  allowed 
by  special  contract  between  the  parties,  and  the  penalties  imposed  for  the 
taking  of  usury. 


State 

Legal 
Rate 

Maximum 
Rate 

Penalty  for  Usury 

Alabama 

8 

8 

All  interest  forfeited. 

Alaska     . 

8 

12 

Forfeiture  of  double  interest. 

Arizona  . 

6 

No  limit 

No  penalty. 

Arkansas 

6 

ID 

Principal  and  interest  forfeited. 

California 

7 

No  limit 

No  penalty. 

Colorado 

8 

No  limit 

No  penalty. 

Connecticut 

6 

6 

No  penalty. 

Delaware 

6 

6 

Forfeiture  of  a  sum  equal  to  the 
money  lent. 

District  of  Col 

ambi^          6 

lO 

All  interest  forfeited. 

Florida    . 

8 

lo 

All  interest  forfeited. 

Georgia  . 

7 

8 

All  interest  over  8  per  cent  forfeited. 

Idaho 

7 

12 

Interest  and  lo  per  cent  per  annum 
of  principal  forfeited. 

Illinois    . 

5 

7 

All  interest  forfeited. 

Indiana  . 

6 

8 

All  interest  over  6  per  cent  forfeited. 

Indian  Territoi 

ry      .          6 

lO 

Principal  and  interest  forfeited. 

Iowa 

6 

8 

Interest  and  8  per  cent  per  annum 
of  principal  forfeited. 

Kansas    . 

6 

lO 

Forfeiture  of  all  interest  in  excess  of 

P 

10  per  cent,  and  also  an  amount 

equal  to  the  excess  contracted  for. 

Kentucky 

6 

6 

All  interest  over  6  per  cent  forfeited. 

Louisiana 

5 

8 

All  interest  forfeited. 

Maine 

6 

No  limit 

No  penalty. 

Maryland 

6 

6 

All  interest  over  6  per  cent  forfeited. 

Massachusetts 

6 

No  limit 

No  penalty. 

COM.  LAW  —  23 


354 


APPENDIX 


Statb 


Legal 
Kate 


Maximum 
Rate 


Penalty  for  Usury 


Michigan 

5 

7 

All  interest  forfeited. 

Minnesota 

6 

lO 

Principal  and  interest  forfeited. 

Mississippi 

6 

lo 

All  interest  forfeited. 

Missouri . 

6 

8 

Excess  of  interest  forfeited. 

Montana 

8 

No  limit 

No  penalty. 

Nebraska 

7 

10 

All  interest  forfeited. 

Nevada   . 

7 

No  limit 

No  penalty. 

New  Hampshire 

6 

6 

Forfeiture  of  three  times  the  excess 
of  interest  charged. 

New  Jersey 

6 

6 

All  interest  forfeited. 

New  Mexico    . 

6 

12 

Forfeiture  of  double  the  interest,  and 
fine  of  not  less  than  $25  and  not 
over  $100. 

New  York 

6 

6 

Principal  and  interest  forfeited. 

North  Carolina 

6 

6 

All  interest  forfeited. 

North  Dakota 

7 

12 

All  interest  forfeited. 

Ohio 

6 

8 

Forfeiture  of  excess  of  interest. 

Oklahoma 

7 

12 

All  interest  forfeited. 

Oregon    . 

6 

lO 

Principal  and  interest  forfeited. 

Pennsylvania  . 

6 

6 

Forfeiture  of  excess  of  interest. 

Rhode  Island  . 

6 

No  limit 

No  penalty. 

South  Carolina 

7 

8 

All  interest  forfeited. 

South  Dakota . 

7 

12 

All  interest  forfeited. 

Tennessee 

6 

6 

Forfeiture  of  excess  of  interest,  and 
fine. 

Texas 

6 

ID 

All  interest  forfeited. 

Utah 

8 

No  limit 

No  penalty. 

Vermont 

6 

6 

Forfeiture  of  excess  of  interest. 

Virginia  .         . 

6 

6 

All  interest  forfeited. 

Washington     . 

6 

12 

Forfeiture  of  excess  of  interest. 

West  Virginia 

6 

6 

All  interest  over  6  per  cent  forfeited. 

Wisconsin 

6 

ID 

All  interest  forfeited. 

Wyoming 

8 

12 

All  interest  forfeited. 

APPENDIX 


355 


DAYS  OF  GRACE 

The  following  table  shows  the  states  and  territories  in  which  days  of  grace 
are  still  allowed  on  negotiable  instruments.  If  allowed  on  paper  payable  at 
sight,  the  fact  is  designated  in  the  first  column ;  if  on  demand  paper,  in  the 
second  ;  and  if  on  paper  payable  a  certain  time  after  date,  in  the  third  column. 


State 


Alabama 

Alaska    . 

Arizona  . 

Arkansas 

California 

Colorado 

Connecticut    . 

Delaware 

District  of  Columbia 

Florida   . 

Georgia  . 

Idaho 

Illinois    . 

Indiana  . 

Indian  Territory     . 

Iowa 

Kansas   . 

Kentucky 

Louisiana 

Maine     . 

Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 


Sight 

Demand 

Time 

Yes 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

Yes 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

No 

Yes 

No 

No 

No 

No 

No 

No 

No 

No 

No 

Yes 

No 

Yes 

No 

No 

No 

No 

No 

Yes 

No 

No 

Yes 

No 

No 

Yes 

Yes 

No 

No 

No 

No 

No 

Yes 

No 

No 

Yes 

No 

Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

No 

No 

Yes 

No 

No 

No 

356 


APPENDIX 


State 


Sight 


Demand 


Time 


Nebraska Yes  No  Yes 

Nevada No  Yes  Yes 

New  HampshL"e     .        .        .        .        .  Yes  No  No 

New  Jersey No  No  No 

New  Mexico Yes  Yes  Yes 

New  York No  No  No 

North  Carolina Yes  No  Yes 

North  Dakota No  No  No 

Ohio No  No  No 

Oklahoma Yes  Yes  Yes 

Oregon No  No  No 

PerxHsylvanla No  No  No 

Rhode  Island Yes  No  No 

South  Carolina Yes  .    No  Yes 

South  Dakota Yes  Yes  Yes 

Tennessee No  No  No 

Texas Yes  No  Yes 

Utah No  No  No. 

Vermont No  No  No 

Virginia No  No  No 

Washington No  No  No 

West  Virginia No  No  No 

Wisconsin No  No  No 

Wyoming Yes  Yes  Yes 


APPENDIX 


357 


STATUTE  OF   FRAUDS— MARRIED   WOMEN 


The  following  tables  show  the  amounts  to  which  the  Sale  of  Goods  Act  in 
the  Statute  of  Frauds  applies  in  the  different  states ;  also  the  condition  of  the 
statutes  in  the  different  states  and  territories  that  give  married  women  the 
right  to  contract  in  their  own  name. 


Statute  of  Frauds. 

Sale  of  1 

goods,    wares,    and    mer-  | 

May  a  married  woman  become  a  trader 

State 

chandise,  to  the 

value  of 

and  carry  on  business  in  her  own  name. 

$ must  be 

in  writ- 

and  sue  and  be  sued  as  if  single  ? 

ing,  etc. 

Alabama. 

Not  in  force. 

Yes,  but  can  not  sell  or  mortgage 
her  real  estate  without  her 
husband's  consent - 

Alaska. 

$50. 

Arizona. 

Any  value. 

Yes. 

Arkansas. 

$30- 

Yes. 

California. 

$200. 

Yes,  if  she  obtains  a  permit  from 
the  court. 

Colorado. 

$50. 

Yes. 

Connecticut. 

$50. 

Yes. 

Delaware. 

Not  in  force. 

Yes. 

District  of  Columbia. 

$50. 

Yes. 

Florida. 

Any  value. 

Yes,  if  she  obtains  permit  from 
the  court. 

Georgia. 

$50. 

Yes,  but  she  can  not  bind  herself 
by  contract  of  suretyship. 

Idaho. 

$200. 

Yes. 

Illinois. 

Not  in  force. 

Yes,  except  that  she  can  not  go 
into  partnership  without  her 
husband's  consent. 

Indiana. 

$50. 

Yes,  but  she  can  not  become 
surety  for  any  one,  neither  can 
she  sell  or  mortgage  real  estate 
unless  her  husband  joins  in  the 
conveyance. 

Indian  Territory. 

$30- 

Yes. 

Iowa. 

Any  value. 

Yes. 

Kansas. 

Not    in    force 

when 

Yes. 

contract    is 

to   be 

performed 

within 

one  year. 

358 


APPENDIX 


Statute  of  Frauds.    Sale  of 

goods,    wares,    and    mer- 

May a  married  woman  become  a  trader 

Stats 

chandise,  to  the  value  of 

and  carry  on  business  in  her  own  name, 

$ ,  must  be  in  writ- 

and sue  and  be  sued  as  if  single  ? 

ing,  etc. 

Kentucky. 

Not  in  force. 

Yes. 

Louisiana. 

Over  $500.     Must  be 

Yes,  if  she  carries  on  a  separate 

proved    by  a   wit- 

trade. 

ness  and   corrobo- 

rating testimony. 

Maine. 

$30. 

Yes,  except  in  certain  partnership 
contracts. 

Maryland. 

$50. 

Yes. 

Massachusetts. 

$50. 

Yes,  but  she  must  file  a  married 
woman's  certificate. 

Michigan. 

$50. 

Yes,  but  she  can  not  become 
surety  for,  nor  form  a  partner- 
ship with,  her  husband. 

Minnesota. 

$50- 

Yes,  but  she  can  not  convey  real 
estate  unless  her  husband  joins 
in  the  conveyance. 

Mississippi. 

$50. 

Married  woman  has  same  rights 
as  a  single  woman. 

Missouri. 

$30- 

Yes. 

Montana. 

$200. 

Yes,  in  most  cases  has  all  the 
rights  of  a  single  woman. 

Nebraska. 

$50. 

Yes. 

Nevada. 

$50. 

Yes. 

New  Hampshire. 

$33- 

Yes,  but  she  can  not  become 
surety  for  her  husband. 

New  Jersey. 

$30- 

Yes,  but  she  can  not  become 
surety  for  her  husband,  nor 
become  liable  as  surety  or 
guarantor,  except  in  certain 
cases. 

New  Mexico. 

Any  value. 

Yes,  but  her  husband  must  join 
in  a  mortgage  or  conveyance 
of  real  estate. 

New  York. 

$50. 

Yes. 

North  Carolina. 

Not  in  force. 

Yes,  provided  she  registers  as  a 
trader  in  the  office  of  Registrar 
of  Deeds. 

North  Dakota. 

%SO. 

Yes. 

J 


APPENDIX 


359 


Statute  of  Frauds. 

Sale  of 

goods,    wares,    and    mer- 

May a  married  woman  become  a  tra'jer 

State 

chandise,  to  the 

value  of 

and  carry  on  business  in  her  own  name, 

$ must  be 

in  writ- 

and  sue  and  be  sued  as  if  single  ? 

ing,  etc. 

Ohio. 

Not  in  force. 

Yes. 

Oklahoma. 

All  amounts  over  $50. 

Yes. 

Oregon. 

$50. 

Yes. 

Pennsylvania. 

Not  in  force. 

Yes,  except  that  she  can  not  be- 
come surety,  indorser,  or  guar- 
antor. 

Rhode  Island. 

Not  in  force. 

Yes. 

South  Carolina. 

$50. 

Yes. 

South  Dakota. 

$50. 

Yes. 

Tennessee. 

Not  in  force. 

Yes. 

Texas. 

Not  in  force. 

Yes,  but  she  can  not  carry  on  a 
partnership  business  nor  buy 
on  credit.  Her  profits  are 
liable  for  her  husband's  debts. 

Utah. 

$200. 

Yes. 

Vermont. 

$40. 

Yes,  but  she  can  not  become 
surety  for  her  husband. 

Virginia. 

Not  in  force. 

Yes. 

Washington. 

$50. 

Yes,  but  she  can  not  become  a 
partner  with  her  husband. 

West  Virginia. 

Not  in  force. 

Yes. 

Wisconsin. 

$50. 

Yes,  she  can  carry  on  business 
with  her  own  separate  property. 

Wyoming. 

$50. 

Yes. 

EXEMPTION  LAWS 


In  most  of  the  states  there  exists  a  homestead  law  which  exempts  certain 
real  property  from  liability  of  attachment  by  the  creditors  of  the  owner. 
Certain  personal  property  is  also  exempt,  and  in  most  cases  wages  are  exempt 
for  a  specified  period.  The  following  is  approximately  the  law  in  the  several 
states  and  territories :  — 

Alabama.  —  Homestead  to  the  value  of  $2000  or  160  acres  of  land  not 
exceeding  $2000  in  value.  Personal  property  to  the  value  of  fiooo  and  $25 
wages. 

Alaska.  —  No  homestead  law.  Specified  articles  of  personal  property 
worth  from  $750  to  $1000,  and  wages  for  thirty  days  preceding  judgment. 


36o  APPENDIX 

Arizona.  —  Homestead  to  the  value  of  $4000  if  claim  is  recorded.  Per- 
sonal property  to  the  value  of  $1000.  Wages  earned  for  thirty  days  preceding 
levy. 

Arkan^s.  —  Homestead  of  160  acres  in  country  or  one-quarter  acre  in 
town  or  village,  not  exceeding  in  value  $2500.  Personal  property  including 
wages  for  sixty  days,  to  the  amount  of  $500  for  the  head  of  a  family  and  $200 
for  a  single  person. 

California.  —  Homestead  to  the  value  of  $5000.  Certain  specified  articles 
of  personal  property  not  to  exceed  $1000.  Wages  for  thirty  days  if  necessary 
to  support  family,  but  one  half  of  wages  is  liable  for  debts  contracted  for 
necessaries. 

Colorado.  —  Homestead  to  the  value  of  $2000  if  claim  is  recorded.  Cer- 
tain specified  articles  of  personal  property,  including  library  and  instruments 
of  professional  men.     Sixty  per  cent  of  any  amount  of  wages  due. 

Connecticut.  —  Homestead  to  amount  of  $1000  if  claim  is  recorded. 
Certain  specified  articles  of  personal  property  and  wages  to  the  amount  of 
$50. 

Delaware.  —  No  homestead  exemption,  and  each  county  has  a  special 
law  as  to  exemption  of  personal  property. 

District  of  Columbia.  —  Specified  articles  of  personal  property  not  ex- 
ceeding $1000.  Wages  for  two  months  not  to  exceed  $200  and  the  salary 
of  all  government  employees. 

Florida.  —  Homestead  consisting  of  160  acres  in  country  or  one  half  acre 
in  town..  Personal  property  to  the  value  of  $1000  for  the  head  of  a  family 
residing  in  the  state,  and  all  wages. 

Georgia.  —  Constitution  of  the  state  provides  a  homestead  exemption 
of  $1600,  either  real  or  personal  property,  and  the  statutes  allow  fifty  acres 
of  land  and  five  acres  additional  for  every  child  under  sixteen  years  of  age. 
Certain  specified  articles  of  personal  property  and  all  laborers'  wages. 

Idaho.  —  Homestead  to  the  value  of  $5000  for  a  married  man  and  $1000 
for  a  single  man,  but  declaration  of  homestead  must  be  filed.  Specified 
articles  of  personal  property  to  the  value  of  $1000  and  wages  for  thirty  days. 

Illinois.  —  Homestead  to  value  of  $1000.  Personal  property,  $400  for 
married  persons,  $100  for  single  persons.  Wages  to  the  amount  of  $15 
weekly  for  the  head  of  a  family. 

Indiana.  —  $600  worth  of  either  real  or  personal  property  is  allowed  as 
exemption  to  householders  and  married  women  residents  of  the  state.  One 
month's  wages  not  to  exceed  $25. 

Indian  Territory.  —  Homestead  worth  $2500,  but  not  to  exceed  160 
acres  if  in  the  country.  Personal  property  and  wages  for  sixty  days,  not  to 
exceed  $500  for  married  persons  and  $200  for  single  persons. 

Iowa.  —  Homestead  one  half  acre  in  town  or  forty  acres  in  country. 
Specified  articles  of  personal  property  not  to  e^cceed  %ioq  and  wages  for 
ninety  days. 


APPENDIX  •  361 

Kansas.  —  Homestead  one  acre  in  town  and  160  acres  in  country.  Speci- 
fied articles  of  personal  property  and  wages  for  three  months  preceding  levy. 

Kentucky.  —  Homestead  to  the  value  of  $1000.  Specified  articles  of 
personal  property  and  wages  to  the  amount  of  $50. 

Louisiana.  —  Homestead  to  the  value  of  $2000.  Specified  articles  of  per- 
sonal property  and  all  laborers'  wages. 

Maine.  —  Homestead  to  the  value  of  $500  if  recorded.  Specified  articles 
of  personal  property.  Wages  to  the  value  of  $20  except  in  suit  for  necessaries 
and  then  $10. 

Maryland.  —  $100  worth  of  personal  property  and  wages  to  the  amount 
of  $100. 

Massachusetts.  —  Homestead  to  the  value  of  $800  if  recorded.  Specified 
articles  of  personal  property  and  wages  to  the  amount  of  $20  except  in  suit 
for  necessaries,  and  then  $10. 

Michigan.  —  Homestead  to  the  value  of  $1500.  Specified  articles  of  per- 
sonal property  and  goods  to  the  value  of  $250.  Eighty  per  cent  of  the  wages 
of  a  householder  not  to  exceed  $30,  others  forty  per  cent  up  to  $15. 

Minnesota.  —  Homestead  consisting  of  a  city  lot  or  one  half  acre  in  a 
town  or  eighty  acres  in  the  country,  not  allowed  to  a  single  man  unless  he 
resides  on  the  property.  Specified  articles  of  personal  property  amounting  to 
about  $1500  and  wages  to  the  amount  of  $25. 

Mississippi.  —  Homestead  to  the  value  of  $2000,  but  not  over  160  acres  if 
in  the  country.  Personal  property  consisting  of  certain  articles  in  the  country, 
and  to  the  value  of  $250  in  towns.  Wages  of  $100  per  month  to  head  of 
family,  $20  to  others. 

Missouri.  —  Homestead  to  the  value  of  $3000  in  cities  and  $1500  in 
country  and  towns.  Personal  property  consisting  of  certain  specified  arti- 
cles not  to  exceed  in  value  $300,  including  ninety  per  cent  of  wages. 

Montana.  —  Homestead  to  the  value  of  $2500.  Specified  articles  of  per- 
sonal property  and  wages  for  thirty  days. 

Nebraska.  —  Homestead  to  the  value  of  $2000.  Personal  property  not 
exceeding  $500,  but  not  in  addition  to  homestead,  and  wages  for  sixty  days. 

Nevada.  —  Homestead  to  the  value  of  $5000.  Specified  articles  of  per- 
sonal property  and  wages  not  to  exceed  $50  earned  in  month  process  is 
issued. 

New  Hampshire.  —  Homestead  to  the  value  of  $500.  Certain  specified 
articles  of  personal  property  and  wages  to  the  amount  of  $20  except  as  against 
debts  for  necessaries. 

New  Jersey.  —  Homestead  to  the  value  of  $1000  if  advertised  and  re- 
corded according  to  law.  Personal  property  to  the  amount  of  $200  and  wear- 
ing apparel,  also  all  wages. 

New  Mexico.  —  Homestead  to  the  value  of  $1000.  Personal  property 
consisting  of  certain  specific  articles  and  $500  when  party  does  not  own 
homestead.     Wages  for  three  months,  except  in  certain  specific  gases. 


362  APPENDIX 

New  York.  —  Homestead  to  the  value  of  $1000  if  notice  is  recorded.  Cer- 
tain  specific  articles  to  the  head  of  a  family,  and  personal  property  in  addition 
to  the  value  of  $250,  except  for  purchase  price.  Wages  for  sixty  days  if 
necessary  for  the  support  of  the  family. 

North  Carolina.  —  Homestead  to  the  value  of  $1000.  Personal  prop- 
erty to  the  value  of  $500,  and  sixty  days'  wages  if  necessary  for  the  support  of 
the  family. 

North  Dakota.  —  Homestead  to  the  value  of  $5000.  Personal  property 
to  the  value  of  $1000  to  the  head  of  the  family  residing  in  the  state.  Wages 
not  exempt. 

Ohio.  —  Homestead  to  the  value  of  $1000.  Certain  specific  articles  of  per- . 
sonal  property.  Wages  for  three  months  if  necessary  for  the  support  of  the 
family. 

Oklahoma.  —  Homestead  consisting  of  160  acres  in  the  country,  or  one 
acre  in  city  or  town.  Personal  property  consisting  of  certain  specific  articles. 
Wages  for  ninety  days  to  the  head  of  a  family. 

Oregon.  —  Homestead  to  the  value  of  $1500,  not  to  be  less  than  twenty 
acres  in  the  country  or  one  lot  in  city  or  town.  Personal  property  consisting 
of  certain  specific  articles,  and  wages  for  thirty  days  if  necessary  for  the  sup- 
port of  the  family. 

Pennsylvania.  —  Real  or  personal  property  to  the  value  of  $300,  and  all 
wages. 

Rhode  Island.  —  Household  furniture  to  the  value  of  $300,  tools  and 
books  to  the  value  of  $300,  and  library  of  professional  men.  Wages  to  the 
amount  of  $10,  except  as  against  debts  for  necessaries. 

South  Carolina.  —  Homestead  to  the  value  of  $1000.  Personal  prop- 
erty to  the  value  of  $500.  Wages  for  sixty  days  if  there  is  a  family  depend- 
ing on  them  for  support. 

South  Dakota.  —  Homestead  consisting  of  160  acres  in  the  country  or 
one  acre  in  city  or  town,  to  the  value  of  $5000.  Personal  property  to  the  value 
of  $750,  to  the  head  of  a  family,  and  $300  to  a  single  person  not  the  head  of 
a  family.  No  exemptions  against  purchase  price.  Wages  for  sixty  days  if 
necessary  for  support  of  family. 

Tennessee.  —  Homestead  to  the  value  of  $1000.  Certain  specific  articles 
of  personal  property.     $30  in  wages. 

Texas.  —  Homestead  consisting  of  200  acres  in  country,  or  city  lot  to 
the  value  of  $5000.  Certain  specific  articles  of  personal  property.  Current 
wages  for  personal  services. 

Utah.  —  Homestead  to  the  value  of  $1500,  and  $500  additional  for  wife 
and  $250  for  each  child.  Certain  specific  articles  of  personal  property  not 
exceeding  $1000,  and  one  half  of  wages  for  thirty  days,  but  not  to  be  less 
than  $30. 

Vermont.  —  Homestead  to  the  value  of  $500.  Certain  specific  articles  pf 
personal  property,  and  wages  to  the  amount  of  $10. 


APPENDIX  363 

Virginia.  —  Homestead  to  the  value  of  $2000.  Certain  specific  articles  of 
personal  property  and  one  month's  wages,  not  to  exceed  $50. 

Washington.  —  Homestead  to  the  value  of  $2000  if  declaration  is  filed. 
Certain  specific  articles  of  personal  property,  and  in  the  case  of  a  householder 
$1000  in  addition.  Wages  to  the  amount  of  $100  if  family  is  dependent 
thereon. 

West  Virginia.  —  Homestead  to  the  value  of  $1000.  Personal  property, 
including  wages,  to  the  amount  of  $200. 

Wisconsin.  —  Homestead  consisting  of  one  fourth  acre  in  town  or  forty 
acres  in  the  country.  Certain  specific  articles  of  personal  property,  not  to  ex- 
ceed $200  in  value.     Wages  for  three  months,  not  exceeding  $60  a  month. 

Wyoming.  —  Homestead  to  the  value  of  $1500.  Personal  property  to  the 
value  of  $800  for  a  married  man,  and  $300  for  a  single  man.  Wages  not  to 
exceed  $100. 

CHATTEL  MORTGAGES 

The  following  extracts  show  the  statutory  provisions  as  to  chattel  mort- 
gages in  the  different  states  and  territories  :  — 

Alabama.  —  Must  be  recorded  in  the  office  of  the  probate  judge  where  the 
mortgagor  resides  and  also  where  the  property  is  located.  Remains  in  force 
as  long  as  the  debt.  No  renewal  necessary.  If  the  property  is  moved  to 
another  county,  the  mortgage  should  be  recorded  there  within  three  months. 
Is  not  valid  as  to  third  parties  on  a  stock  of  merchandise  remaining  in  the 
possession  of  the  mortgagor.  Is  not  valid  as  to  third  parties  on  after  acquired 
property. 

Arizona.  —  Must  be  filed  in  the  office  of  the  recorder  where  the  mortgagor 
resides  and  v/here  the  property  is  located.  No  renewal  is  necessary.  Is  not 
valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  possession  of 
mortgagor  nor  on  after  acquired  property. 

Arkansas.  —  Must  be  filed  or  recorded  in  the  office  of  the  recorder  where 
the  mortgagor  resides.  If  recorded,  is  good  for  the  life  of  the  debt,  but  in  case 
of  extension  by  partial  payment,  these  payments  must  be  recorded.  If  it  is 
filed,  it  is  valid  for  one  year  and  must  be  renewed  within  thirty  days  preceding 
the  expiration  of  one  year.  Is  valid  as  to  third  parties  on  stock  of  merchan- 
dise remaining  in  possession  of  the  mortgagor,  provided  he  acts  as  agent  for 
the  mortgaged  when  sales  are  made.  Is  valid  as  to  third  parties  on  after 
acquired  property  if  the  mortgage  provides  therefor. 

California.  —  Must  be  recorded  in  the  office  of  the  recorder  where  the 
mortgagor  resides  and  where  the  property  is  located.  Remains  in  force  dur- 
ing the  life  of  the  debt.  No  renewal  is  necessary.  If  the  property  is  re- 
moved to  another  county,  the  mortgage  should  be  recorded  there  within  thirty 
days.  Is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  pos- 
session of  the  mortgagor,  but  not  valid  on  after  acquired  property. 


364  APPENDIX 

Colorado.  —  Under  $300  it  may  be  filed  in  office  of  recorder  where  the 
property  is  located.  In  other  cases  it  must  be  recorded  in  the  office  of  the 
recorder.  Remains  in  force  for  two  years  on  sums  of  $2500  or  under,  for  five 
years  on  sums  of  $2500  to  $20,000,  for  ten  years  on  sums  of  $20,000  or  over. 
Must  be  renewed  by  annual  statement  showing  unpaid  amounts  remaining 
due.  Mortgagee  may  take  possession  any  time  within  thirty  days  after  ma- 
turity and  mortgage  remains  valid  during  that  time.  It  is  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor  if 
the  mortgage  so  states  and  the  property  is  applied  to  the  mortgage  debt.  It 
is  also  valid  on  all  after  acquired  property  except  merchandise. 

Connecticut.  —  Must  be  recorded  in  the  town  clerk's  office  where  prop- 
erty is  located.  Only  specific  articles  are  subject  to  mortgage.  Need  not  be 
renewed.  Is  not  valid  as  to  third  parties  on  stock  of  merchandise  remaining 
in  possession  of  mortgagor,  or  on  after  acquired  property. 

Delaware.  —  Must  be  recorded  within  ten  days  in  the  office  of  the  recorder 
where  property  is  located.  Is  valid  for  three  years,  at  which  time  it  must  be 
renewed.  Is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor,  but  is  not  valid  on  after  acquired  property. 

District  of  Columbia.  —  Must  be  recorded  in  the  office  of  the  recorder 
where  property  is  located.  Need  not  be  renewed.  Is  not  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor,  or 
on  after  acquired  property. 

Florida.  —  Must  be  recorded  in  the  office  of  the  clerk  of  the  circuit  court 
where  the  property  is  located.  Need  not  be  renewed.  Is  not  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  mortgagor. 

Georgia.  —  Must  be  recorded  in  the  office  of  the  clerk  of  the  superior 
court  where  the  mortgagor  resides,  if  he  is  a  resident,  and  if  he  is  not,  then 
where  the  property  is  located.  No  renewal  is  necessary.  Is  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor 
and  on  after  acquired  property. 

Idaho.  —  Must  be  recorded  in  office  of  recorder  where  the  property  is 
•ocated.  If  the  property  is  removed  to  another  county,  mortgage  must  be 
recorded  within  ten  days.  Is  not  valid  as  to  third  parties  on  stock  of  mer- 
chandise remaining  in  possession  of  the  mortgagor  unless  the  proceeds  of  sale 
go  to  the  mortgagee.     Is  not  valid  on  after  acquired  property. 

Illinois.  —  Must  be  recorded  in  the  office  of  the  recorder  where  the  mort- 
gagor resides,  if  he  is  a  resident ;  and  if  he  is  not,  then  in  the  county  where  the 
property  is  located.  Is  valid  until  the  debt  matures  or  for  three  years  if  the 
debt  has  not  matured,  and  within  thirty  days  of  the  maturity  of  the  debt  or  at 
the  expiration  of  three  years  may  be  renewed  by  filing  an  affidavit  showing  the 
amount  due.  If  mortgagor  resides  in  the  state,  mortgage  must  be  acknowl- 
edged by  a  justice  of  the  peace,  or  one  of  certain  court  officers,  of  mortgagor's 
county.  Is  not  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor  or  on  after  acquired  property. 


APPENDIX  365 

Indiana.  —  Must  be  recorded  within  ten  days  in  the  office  of  the  recorder 
where  the  mortgagor  resides.  Need  not  be  renewed.  Is  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  mortgagor. 

Indian  Territory.  —  Must  be  filed  or  recorded  with  the  clerk  of  the 
recording  district  where  the  property  is  located.  If  recorded,  no  renewal  is 
necessary.  If  filed,  it  is  not  valid  for  more  than  one  year  unless  within  thirty 
days  before  the  expiration  of  the  year  there  has  been  filed  an  affidavit  that  the 
mortgage  has  not  been  paid.  It  is  valid  as  to  third  parties  on  stock  of  mer- 
chandise remaining  in  the  possession  of  the  mortgagor  if  the  mortgagor  acts 
as  agent  for  the  mortgagee. 

Iowa.  —  Must  be  recorded  in  the  office  of  the  recorder  where  the  mort- 
gagor resides.  On  exempt  property  the  wife  must  join  except  for  the  purchase 
price  of  the  property.  No  renewal  is  necessary.  It  is  valid  as  to  third  par- 
ties on  stock  of  merchandise  remaining  in  the  possession  of  the  mortgagor 
and  on  after  acquired  property. 

Kansas.  —  Must  be  filed  with  the  register  of  deeds  of  the  county  where 
the  property  is  located,  and  where  the  mortgagor  resides  if  he  resides  within 
the  state.  It  is  valid  for  two  years  from  the  date  of  filing.  Must  be  renewed 
within  thirty  days  preceding  expiration  by  affidavit  showing  the  amount  unpaid. 
Is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  the  posses- 
sion of  the  mortgagor  if  the  mortgagor  acts  as  agent  for  the  mortgagee  when 
sales  are  made.  Also  valid  on  after  acquired  property  if  the  mortgage  pro- 
vides therefor. 

Kentucky.  —  Must  be  recorded  with  the  county  clerk  where  the  property 
is  located.  It  is  valid  for  five  years  after  the  maturity  of  the  debt  if  no  note 
has  been  given,  and  for  fifteen  years  where  a  note  has  been  given.  No  re- 
newal is  necessary.  Is  valid  as  to  third  parties  on  stock  of  merchandise 
remaining  in  the  possession  of  the  mortgagor  if  the  goods  can  be  identified, 
but  is  not  valid  on  after  acquired  property. 

Louisiana.  —  Chattel  mortgages  are  unknown  in  this  state. 

Maine.  —  Must  be  recorded  in  the  office  of  the  town  clerk  where  the  mort- 
gagor resides,  and  if  the  mortgagor  does  not  reside  in  the  state  must  be 
recorded  in  the  county  where  the  property  is  situated.  No  renewal  is  neces- 
sary. Is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  pos- 
session of  the  mortgagor,  but  is  not  valid  on  after  acquired  property. 

Maryland.  —  Must  be  recorded  within  twenty  days  in  the  office  of  the 
clerk  of  the  circuit  court  where  the  mortgagor  resides,  or  if  he  does  not  reside 
in  the  state  must  be  recorded  in  the  county  where  the  property  is  located. 
No  renewal  is  necessary. 

Massachusetts.  —  Must  be  recorded  within  fifteen  days  with  the  .town 
clerk  where  the  mortgagor  resides.  If  the  mortgagor  is  a  non-resident,  the 
mortgage  must  be  recorded  where  the  property  is  located.  No  renewal  is 
necessary.  Is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor,  but  is  not  valid  on  after  acquired  property. 


366  APPENDIX 

Michigan.  —  Must  be  filed  with  the  city  or  town  derk  where  the  mort- 
gagor resides.  Remains  in  force  for  one  year,  and  must  be  renewed  within 
thirty  days  preceding  expiration  by  affidavit  showing  amount  unpaid.  Is 
valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  possession  of 
the  mortgagor  and  on  after  acquired  property  if  the  mortgage  so  provides. 

Minnesota.  —  Must  be  filed  with  the  city,  town,  or  village  clerk  where 
the  mortgagor  resides  and  where  the  property  is  located.  Remains  in  force 
for  six  years  after  filing  as  against  creditors  or  subsequent  mortgagees  or  pur- 
chasers. No  renewal  is  necessary.  Husband  and  wife  must  join,  and  two 
witnesses  and  an  acknowledgment  are  necessary.  Is  not  valid  as  to  third 
parties  on  a  stock  of  merchandise  remaining  in  the  possession  of  the  mortgagor, 
but  if  the  mortgage  so  recites  it  is  valid  on  after  acquired  property. 

Mississippi.  —  Must  be  recorded  with  the  chancery  clerk  where  the  prop- 
erty is  located.  If  property  is  removed,  it  must  be  re-recorded  within  one  year. 
No  renewal  is  necessary.  It  is  not  valid  as  to  third  parties  on  stock  of  mer- 
chandise remaining  in  possession  of  the  mortgagor,  but  is  valid  on  after 
acquired  property. 

Missouri.  —  Must  be  filed  or  recorded  with  the  recorder  where  the  mort- 
gagor resides.  Is  valid  for  five  years  if  filed,  and  during  the  life  of  the  debt 
if  recorded.  No  renewal  is  necessary.  Is  not  valid  as  to  third  parties  on  a 
stock  of  merchandise  remaining  in  possession  of  the  mortgagor  unless  the 
proceeds  of  sales  go  to  the  mortgagee  in  reducing  the  mortgage  debt.  It  is 
not  valid  on  after  acquired  property  unless  the  mortgagee  takes  possessioa- 
before  creditors  secure  a  lien. 

Montana.  —  Must  be  filed  with  the  county  clerk  where  the  mortgagor 
resides.  If  he  does  not  reside  in  the  state,  must  be  filed  in  the  county  where 
the  property  is  located.  Is  valid  until  sixty  days  after  the  debt  matures,  not 
exceeding,  however,  one  year  and  sixty  days.  Must  be  renewed  within  sixty 
days  after  the  debt  becomes  due  by  filing  an  affidavit  in  the  office  where  the 
mortgage  is  filed,  setting  forth  the  amount  due.  Is  valid  as  to  third  parties 
on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor  if  made 
in  good  faith  and  proceeds  of  the  sale  go  to  the  mortgagee. 

Nebraska.  —  Must  be  filed  with  the  county  clerk  where  the  mortgagor 
resides,  and  if  he  does  not  reside  in  the  state,  must  be  filed  in  the  county 
where  the  property  is  situated.  Is  valid  for  five  years  against  others  than  the 
parties,  but  it  is  not  valid  as  to  third  parties  on  stock  of  merchandise  in  pos- 
session of  the  mortgagor,  or  on  after  acquired  property. 

Nevada.  —  Must  be  recorded  in  the  office  of  the  recorder  where  the  mort- 
gagor resides  and  where  the  property  is  located.  Remains  in  force  for  six 
years  from  maturity  of  the  debt.  No  renewal  is  necessary.  If  the  mortgage 
is  recorded,  it  is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor. 

New  Hampshire.  —  Must  be  recorded  with  the  town  clerk  where  the 
mortgagor  resides.    If  he  does  not  reside  in  the  state,  must  be  recorded  in  the 


APPENDIX  367 

county  where  the  property  is  situated.  No  renewal  is  necessary.  Is  not  valid 
as  to  third  parties  on  a  stock  of  merchandise  remaining  in  the  possession  of 
the  mortgagor  unless  the  proceeds  of  the  sale  go  to  the  mortgagee  in  reduction 
of  the  mortgage  debt. 

New  Jersey.  —  Must  be  recorded  with  the  county  clerk  or  register  of  deeds 
where  the  mortgagor  resides.  If  he  does  not  reside  in  the  state,  must  be  re- 
corded in  the  county  where  the  property  is  situated.  Need  not  be  renewed. 
If  recorded,  it  is  valid  as  to  third  parties  on  a  stock  of  merchandise  remaining 
in  possession  of  the  mortgagor.  If  the  mortgage  so  provides  it  is  valid  on 
after  acquired  property. 

New  Mexico.  —  Must  be  filed  or  recorded  with  the  probate  clerk  where 
the  property  is  located.  Remains  in  force  for  one  year.  Must  be  renewed 
within  thirty  days  preceding  its  expiration  by  affidavit  showing  the  amount 
unpaid.  Crops  can  not  be  mortgaged  until  they  have  matured  and  are  har- 
vested. It  is  not  valid  as  to  third  parties  on  a  stock  of  merchandise  remain- 
ing in  possession  of  the  mortgagor. 

New  York.  —  Must  be  filed  with  the  register  of  New  York  City  or  the 
county  clerk  if  in  a  county  seat,  otherwise  with  the  town  clerk  where  the 
mortgagor  resides.  If  the  mortgagor  does  not  reside  in  the  state,  the  mortgage 
must  be  filed  in  the  county  where  the  property  is  situated.  Remains  valid  for 
one  year  as  against  subsequent  mortgagors  and  purchasers.  Must  be  renewed 
within  thirty  days  preceding  expiration  by  statement  showing  the  amount  due. 
Is  not  valid  as  to  third  parties  on  a  stock  of  merchandise  remaining  in  posses- 
sion of  the  mortgagor  unless  the  mortgagor  is  in  possession  as  agent  for 
the  mortgagee  and  the  sale  is  for  his  benefit.  It  is  not  valid  on  after  acquired 
property. 

North  Carolina.  —  Must  be  recorded  with  the  re^ster  of  deeds  where 
the  mortgagor  resides.  If  he  does  not  reside  in  the  state,  must  be  recorded  in 
the  county  where  the  property  is  located.  No  renewal  is  necessary.  It  is  not 
valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  possession  of 
the  mortgagor  unless  the  mortgagor  has  possession  as  the  mortgagee's  agent 
and  the  pror-jeds  go  to  the  reduction  of  the  mortgage  debt.  It  is  not  valid  on 
after  acquired  property. 

North  Dakota.  —  Must  be  recorded  with  the  register  of  deeds  where  the 
property  is  located.  Remains  in  force  for  three  years.  Must  be  renewed 
within  ninety  days  preceding  the  expiration  of  three  years  by  affidavit  showing 
the  amount  unpaid.  Is  valid  as  to  third  parties  on  a  stock  of  merchandise 
remaining  in  the  possession  of  the  mortgagor  if  the  mortgagor  is  required  to 
account  to  the  mortgagee  for  the  proceeds  of  the  sale.  It  is  also  valid  on  after 
acquired  property. 

Ohio.  —  Must  be  filed  with  the  township  clerk,  or  the  recorder,  if  in  the 
county  seat  where  the  mortgagor  resides.  If  the  mortgagor  does  not  reside 
in  the  state,  must  be  filed  in  the  county  where  the  property  is  situated.  Re- 
mains in  force  for  one  year.    Must  be  renewed  within  thirty  days  after  the 


368  APPENDIX 

expiration  by  an  affidavit  showing  the  amount  unpaid.  Is  not  valid  as  to 
third  parties  on  stock  of  merchandise  remaining  in  possession  of  the  mort- 
gagor unless  the  mortgagee  takes  possession  before  the  third  party  makes  a 
levy  or  unless  the  mortgagor  is  by  the  terms  of  the  mortgage  made  agent  for 
the  mortgagee  and  required  to  account  to  the  mortgagee  for  all  sales.  Is  not 
valid  on  after  acquired  property  unless  the  property  is  actually  delivered  to  the 
mortgagee  or  the  mortgagee  takes  possession  before  other  rights  intervene. 

Oklahoma.  —  Must  be  filed  with  the  register  of  deeds  where  the  mortgagor 
resides  if  a  resident  of  the  state  ;  if  not,  where  the  property  is  located.  Re- 
mains in  force  for  three  years.  Must  be  renewed  within  thirty  days  preceding 
expiration  by  affidavit  showing  the  amount  unpaid.  It  is  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor,  but 
is  not  valid  on  after  acquired  property. 

Oregon.  —  Must  be  filed  or  recorded  with  the  county  clerk  where  the  mort- 
gagor resides.  If  he  does  not  reside  in  the  state,  must  be  filed  or  recorded  in 
the  county  where  the  property  is  located.  Remains  in  force  for  one  year  and 
must  be  renewed  within  thirty  days  preceding  expiration  by  affidavit  showing 
the  amount  unpaid,  unless  it  is  executed  and  acknowledged  as  a  real  estate  mort- 
gage and  recorded,  in  which  case  no  renewal  is  required.  Is  not  valid  as  to 
third  parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortga- 
gor or  on  after  acquired  property. 

Pennsylvania.  —  Must  be  recorded  with  the  county  recorder  or  register 
where  the  mortgagor  resides.  If  the  mortgagor  does  not  reside  in  the  state, 
must  be  recorded  in  the  county  where  the  property  is  located.  Only  specific 
articles  can  be  mortgaged.  Must  be  renewed  within  three  months  after  ma- 
turity. Is  not  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor  or  on  after  acquired  property. 

Rhode  Island.  —  Must  be  recorded  with  the  town  clerk  where  the  mort- 
gagor resides.  If  he  does  not  reside  in  the  state,  must  be  recorded  in  the 
county  where  the  property  is  located.  ,  No  renewal  is  necessary.  If  properly 
recorded,  it  is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
the  possession  of  the  mortgagor,  but  is  not  valid  on  after  acquired  property 
as  against  creditors  who  secure  a  lien  before  the  mortgagee  takes  possession. 

South  Carolina.  —  Must  be  recorded  within  forty  days  with  the  register 
of  conveyances  where  the  mortgagor  resides.  If  he  does  not  reside  in  the 
state,  must  be  recorded  in  the  county  where  the  property  is  located.  No 
renewal  is  necessary.  It  is  valid  as  to  third  parties  on  stock  of  merchandise  re- 
maining in  the  possession  of  the  mortgagor  and  also  on  after  acquired  property. 

South  Dakota.  —  Must  be  filed  with  the  register  of  deeds  where  property 
is  located.  Remains  in  force  for  three  years.  Must  be  renewed  within  thirty 
days  preceding  expiration  by  an  affidavit  showing  the  amount  unpaid.  It  is 
valid  as  to  third  parties  on  stock  of  merchandise  remaining  in  the  possession 
of  the  mortgagor,  provided  the  mortgagor  is  required  to  account  to  the  mort- 
gagee for  the  proceeds  of  sales.     It  is  also  valid  on  after  acquired  property. 


APPENDIX  369 

Tennessee.  —  Must  be  filed  or  recorded  with  the  register  of  deeds  where 
the  mortgagor  resides.  If  he  does  not  reside  in  the  state,  must  be  filed  or 
recorded  in  the  county  where  the  property  is  located.  Remains  in  force  for 
six  years.  Need  not  be  renewed.  Is  not  valid  as  to  third  parties  on  a  stock 
of  merchandise  remaining  in  the  possession  of  the  mortgagor,  nor  on  after 
acquired  property. 

Texas.  —  Must  be  filed  with  the  county  clerk  where  the  mortgagor  resides. 
If  he  does  not  reside  in  the  state,  must  be  filed  in  the  county  where  the  prop- 
erty is  located.  Need  not  be  renewed.  Is  not  v?Jid  as  to  third  parties  on 
stock  of  merchandise  remaining  in  the  possession  of  the  mortgagor. 

Utah.  —  Must  be  recorded  in  the  office  of  the  recorder  where  the  mort- 
gagor resides.  If  he  does  not  reside  in  the  state,  must  be  recorded  in  the 
county  where  the  property  is  located.  Remains  in  force  for  one  year.  Must 
be  renewed  within  thirty  days  after  one  year  from  filing  by  affidavit  showing 
amount  unpaid.  It  is  not  valid  after  five  years.  Is  not  valid  as  to  third 
parties  on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor. 

Vermont.  —  Must  be  recorded  in  the  city  or  town  clerk's  office  where  the 
mortgagor  resides.  If  he  does  not  reside  in  the  state,  must  be  filed  in  the 
county  where  the  property  is  situated.  Need  not  be  renewed.  It  is  valid  as 
to  third  parties  on  stock  of  merchandise  remaining  in  possession  of  the  mort- 
gagor.    If  possession  is  taken,  it  is  valid  on  after  acquired  property. 

Virginia.  —  Must  be  recorded  in  the  county  or  city  clerk's  office  where  the 
property  is  located.  Need  not  be  renewed.  Is  not  valid  as  to  third  parties 
on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor  unless  the 
mortgagor  has  possession  as  mortgagee's  agent,  and  the  proceeds  go  to  the 
reduction  of  the  mortgage  debt,  but  it  is  not  valid  on  after  acquired  property. 

Washington.  —  Must  be  filed  and  recorded  with  the  county  auditor  where 
the  property  is  located.  Remains  in  force  for  two  years  if  less  than  $300 ;  if 
over  $300,  for  the  life  of  the  debt.  May  be  renewed  within  two  years  by  an 
affidavit  showing  the  amount  unpaid.  It  is  valid  as  to  third  parties  on  stock 
of  merchandise  remaining  in  possession  of  the  mortgagor,  but  the  mortgage 
should  be  so  drawn  that  the  mortgagor  must  apply  sales  in  payment  of  mort- 
gage debt.     It  is  valid  on  after  acquired  property. 

West  Virginia.  —  Must  be  recorded  with  the  county  clerk  where  the 
property  is  located,  and  if  property  is  removed  must  be  re-recorded  within 
three  months.  No  renewal  is  necessary.  It  is  not  valid  as  to  third  parties 
on  stock  of  merchandise  remaining  in  possession  of  the  mortgagor,  nor  is  it 
valid  on  after  acquired  property. 

Wisconsin.  —  Must  be  filed  with  the  city  or  town  clerk  where  the  mort- 
gagor resides.  If  he  does  not  reside  in  the  state,  must  be  filed  in  county 
where  property  is  located.  Remains  in  force  for  two  years.  Must  be  renewed 
within  thirty  days  preceding  the  expiration  by  an  affidavit  showing  the  amount 
unpaid.  It  is  valid  as  to  third  parties  on  stock  of  merchandise  remaining  in 
possession  of  the  mortgagor,  provided  sworn  statements  are  filed  every  sixty 
COM.  LAW  —  24 


370  APPENDIX 

days,  showing  amount  of  goods  sold,  amount  added,  and  payment  made  on 
mortgage  debt,  but  is  not  valid  on  after  acquired  property. 

Wyoming.  —  Must  be  recorded  in  the  county  clerk's  office  where  the  prop- 
erty is  located.  Remains  in  force  for  two  months  after  the  debt  is  due.  If 
property  is  removed,  mortgage  must  be  re-recorded.  Must  be  renewed  within 
sixty  days  after  maturity  of  the  secured  debt.  It  is  valid  as  to  third  parties  on 
stock  of  merchandise  remaining  in  the  possession  of  the  mortgagor,  provided 
the  proceeds  of  the  sales  are  applied  to  the  debt  secured.  It  is  also  valid  on 
after  acquired  property. 


GLOSSARY 

Abandonment :  In  marine  insurance,  the  giving  up  of  property  partly  destroyed 
to  the  insurer,  the  owner's  purpose  being  to  claim  the  full  amount  of 
insurance. 

Abrogate :   To  repeal ;  to  annul  or  destroy ;  to  abolish  entirely. 

Acceptance:  In  mercantile  law  (i)  the  act  by  which  the  person  upon 
whom  a  bill  of  exchange  or  other  order  is  drawn  engages  to  pay  it. 
(2)   The  bill  after  it  has  been  accepted. 

Acceptance  for  Honor:  Acceptance  for  the  protection  of  the  drawer,  by  a 
person  other  than  the  drawee. 

Acceptor :  One  upon  whom  a  bill  of  exchange  is  drawn  and  who  agrees  to  pay 
it  at  maturity. 

Accommodation  Indorser :  One  who  indorses  commercial  paper  without  con- 
sideration, in  order  that  another  may  raise  money  upon  it. 

Accommodation  Paper :  Commercial  paper  for  which  no  consideration  passed 
between  the  original  parties. 

Accord  and  Satisfaction :  The  settlement  of  a  dispute  or  the  satisfaction  of  a 
claim  by  an  executed  agreement  between  the  parties,  giving  the  aggrieved 
party  something  different  in  amount  or  value  from  the  thing  claimed. 

Acknowledgment :  The  act  by  which  a  party  who  has  executed  an  instrument 
declares  or  acknowledges  it  before  a  competent  officer  to  be  his  or  her 
act  or  deed. 

Action :  The  formal  means  of  recovering  one's  rights  in  a  court  of  justice  —  a 
suit  at  law. 

Act  of  God :  Any  accident  resulting  from  a  physical  cause  which  is  irresistible, 
such  as  lightning,  tempest,  etc. 

Adjudication :   The  act  of  a  court  in  giving  judgment  in  a  suit  or  controversy. 

Administrator :  One  who  is  appointed  to  take  charge  of  the  property  or  estate 
of  a  person  who  died  without  having  made  a  will. 

Affidavit :  A  statement  in  writing,  signed  by  the  person  making  it,  and  sworn 
to  by  him  before  an  officer  authorized  to  take  oaths. 

Agency :  The  relation  existing  between  two  parties  by  which  one  is  author- 
ized to  do  certain  acts  for  the  other  with  a  third  party  or  parties. 

Agent :    A  person  who  acts  for  another  called  his  principal. 

Age  of  Consent :  The  age  at  which  infants  are  capable  of  entering  into  a  valid 
contract  of  marriage. 

37*  . 


372  •  GLOSSARY 

Alias :   A  Latin  word  meaning  otherwise  or  hitherto. 

Alien :  One  who  was  born  out  of  the  jurisdiction  of  the  country  of  his  res- 
idence, and,  never  having  been  naturalized  into  it,  owes  allegiance  to  the 
sovereign  of  another  country. 

Alienate :   To  convey  the  title  to  property. 

Alien  Enemy :   An  alien  who  is  the  subject  of  a  hostile  power. 

Alimony :  An  allowance  made  to  a  wife  by  order  of  the  court,  out  of  her  hus- 
band's estate  or  income,  during  a  suit  for  divorce  or  separation  or  at  its 
termination,  for  her  support  for  life  or  for  a  shorter  period. 

Annulment :   The  act  of  making  void. 

Ante-dated :   Dated  at  a  time  earlier  than  the  actual  date. 

Appraise :   To  set  a  price  or  value  upon. 

Appurtenance :  In  a  deed  or  lease,  anything  that  will  go  with  the  land,  as  a 
right  of  way,  or  a  yard  which  has  always  been  used  with  it. 

Arbitration :  The  investigation  and  determination  of  a  cause  or  matter  in  con- 
troversy, by  an  unofficial  person  or  persons  mutually  chosen  by  the  con- 
tending parties. 

Articles  of  Copartnership :  The  written  agreement  by  which  a  copartnership 
is  formed. 

Assent :   Act  of  agreeing  to  anything ;  consent. 

Assets :   Property  available  for  the  payment  of  debts. 

Assign :   To  make  over ;  to  transfer  to  another. 

Assignee:  (i)  The  person  to  whom  a  failing  debtor  transfers  all  of  his  re- 
maining property,  for  the  purpose  of  having  it  distributed  among  his  cred- 
itors.   (2)    One  to  whom  anything  is  assigned. 

Assignment:  (i)  A  transfer  of  his  property  to  an  assignee  by  a  failing 
debtor.  (2)  A  transfer  by  one  person  to  another  of  any  property,  per- 
sonal or  real. 

Assignor :   One  who  assigns  property. 

Attachment :  The  seizure  of  property  by  legal  process,  for  the  purpose  of 
bringing  the  same  into  the  custody  of  the  law. 

Attestation :  The  act  of  witnessing  an  instrument  in  writing,  and  subscribing 
one's  name  to  it  as  a  witness. 

Attorney  in  Fact :   An  agent  appointed  by  power  of  attorney. 

Award :   The  decision  of  arbitrators. 

Bailee :  One  to  whom  the  goods  of  another  are  delivered  for  a  certain 
purpose. 

Bailment :  The  delivery  of  goods  to  another  in  trust  for  a  certain  purpose, 
the  goods  to  be  returned  after  the  object  of  their  delivery  has  been 
accomplished. 

Bailor :    One  who  delivers  goods  to  another  under  a  contract  of  bailment. 

Bank  Note :   A  promissory  note  payable  at  a  bank. 

Bankrupt :  One  who  has  done  some  act  which  renders  him  liable  to  be  pro- 
ceeded against  by  his  creditors  under  the  bankruptcy  law. 


GLOSSARY  5;3 

Bankruptcy :  The  condition  of  one  who  has  been  declared  by  a  court  of  bank- 
ruptcy to  be  a  bankrupt. 

Barter :  To  trade  by  exchange  of  goods,  m  distinction  from  trading  by  the  use 
of  money. 

Beneficiary:  (i)  In  Hfe  insurance,  the  person  to  whom  a  policy  is  made  pay- 
able. (2)  The  person  for  whose  benefit  another  holds  the  legal  title  to 
real  estate. 

Beyond  Seas :  Denotes  absence  from  the  country,  and  is  generally  held  to 
mean  absence  from  the  particular  state. 

Bill  of  Exchange :  A  direction  in  writing  by  the  person  who  signs  it  ordering 
the  one  to  whom  it  is  addressed  to  pay  a  third  person  a  definite  sum  of 
money  at  a  specified  time. 

Bill  of  Lading :  A  document  delivered  by  a  carrier  to  one  sending  goods  by 
him,  acknowledging  that  they  have  been  received  by  him  for  transportation 
to  a  certain  place.     It  is  both  a  receipt  and  a  contract. 

Bill  of  Sale :  An  agreement  in  writing  by  which  one  person  sells  his  interest 
in  personal  property  to  another. 

Blank  Indorsement :  The  indorsement  of  a  negotiable  instrument  by  merely 
writing  the  name  of  the  indorser  without  mentioning  the  name  of  any 
person  to  whom  it  is  to  be  paid. 

Bona  Fide  :    In  good  faith.     Openly  and  without  deceit  or  fraud. 

Bond :  A  written  and  sealed  instrument  by  which  one  party  agrees  to  pay  to 
another  a  certain  amount  of  money  or  to  perform  a  certain  act. 

Breach :    In  the  law  of  contracts,  the  violation  of  an  agreement  or  obligation. 

By-laws :  The  private  laws  or  regulations  made  by  a  corporation  for  its  own 
government. 

Capital  Stock :  The  fund  or  property  as  a  whole,  contributed  or  supposed  to 
have  been  contributed  to  a  corporation  at  its  organization  as  its  property. 

Caveat  Emptor :  Latin  phrase  meaning  "  Let  the  buyer  beware,"  and  applying 
to  a  case  in  which  the  thing  sold  is  before  the  buyer  and  he  examines  it. 

Certificate  of  Deposit :  A  certificate  issued  by  a  bank  or  banker,  showing  that 
a  certain  sum  of  money  has  been  deposited  there,  payable  to  a  certain 
person  or  to  his  order  or  to  the  bearer. 

Certificate  of  Stock:  A  certificate  given  by  the  proper  ofiicers  of  a  corpora- 
tion, showing  that  a  certain  person  owns  a  certain  number  of  shares  of 
the  capital  stock. 

Certified  Check :  A  check  drawn  by  a  depositor  on  a  bank  and  accepted  by 
the  bank  as  valid.  After  certification  the  amount  of  the  check  is  taken 
from  the  depositor's  account  and  set  aside  to  meet  the  check. 

Cestui  que  Trust :   One  for  whose  benefit  property  is  held  by  a  trustee. 

Charter:  (i)  A  special  act  of  legislature  creating  a  particular  corporation. 
(2)  A  formal  instrument  by  which  a  government  grants  special  rights  or 
privileges  to  a  particular  person  or  persons.  (3)  To  hire  or  let  a  vessel 
or  part  of  it. 


374  GLOSSAHV 

Charter  Party :  The  written  instrument  by  which  the  owner  of  a  vessel  lets  it, 

or  a  part  of  it,  to  another. 
Chattel :   An  article  of  personal  property. 

Chattel  Mortgage :   A  conditional  sale  of  personal  property,  which  is  to  be- 
come void  if  a  certain  thing  happens.     Chiefly  used  as  a  security  for  the 

payment  of  money. 
Check :   A  written  order  for  money  drawn  upon  a  bank  or  banker  and  payable 

immediately. 
Chose  in  Action :   A  thing  of  which  one  has  not  the  possession,  but  only  a 

right  to  demand  by  action  at  law 
Chose    in    Possession:    Personal    property  of   which    one    has    the   actual 

possession. 
Civil  Law :   The  system  of  law  of  ancient  Rome.     Also  used  in  distinction 

fi"om  criminal  law. 
Client :   A  person  who  employs  an  attorney  to  act  for  him  in  any  legal  business. 
Collateral  Security :   A  separate  obligation  given  to  guarantee  the  performance 

of  another  contract. 
Common  Carrier :   One  who,  as  a  business,  undertakes  for  hire  to  transport 

from  place  to  place  passengers  or  goods  of  all  who  choose  to  employ  him. 
Common  Law  :    The  old  law  of  England  that  derives  its  force  from  long  usage 

and  custom. 
Compromise:   An  agreement  between  a  debtor  and  his  creditors,  by  whicli 

they  consent  to  accept  a  certain  proportion  of  the  amounts  claimed  and 

discharge  him  from  the  remainder. 
Concurrent :   Existing  together. 
Condition  Precedent:   A  modifying  clause  of  an  agreement  requiring  some  act 

to  be  performed  by  one  person  before  another  is  Hable,  or  in  order  to 

make  him  liable. 
Condition  Subsequent :   A  part  of  an  agreement  relating  to  a  future  event, 

upon  the  happening  of  which  the  obligation  is  no  longer  binding  upon 

one  of  the  parties  to  a  contract. 
Consanguinity :   Relation  by  blood. 

Consideration :  The  reason  or  inducement  in  a  contract  upon  which  the  par- 
ties consent  to  be  bound. 
Consignee :   One  to  whom  merchandise  given  to  a  carrier  by  another  person 

for  transportation  is  directed. 
Consignor :  One  who  gives  merchandise  to  a  carrier  for  transportation  to  another. 
Copartnership :   Same  as  partnership. 
Copyright :   The  exclusive  privilege,  secured  from  a  government,  of  printing, 

publishing,  and  selling  copies  of  writings  or  drawings. 
Corporation :   A  collection  of  individuals  united  by  authority  of  law  into  one 

body  under  a  special  name,  with  the  capacity  of  perpetual  succession  and 

of  acting  in  many  respects  as  an  individi^l. 
Counter-claim :    Same  as  set-off. 


GLOSSARY  375 

Covenant :   Any  promise  contained  in  a  sealed  instrument. 

Coverture :   The  legal  state  and  condition  of  a  married  woman. 

Crime :   A  wrong  which  the  government  takes  notice  of,  as  injurious  to  the 

public,  and  for  the  commission  of  which  it  inflicts  a  punishment. 
Curtesy :   The  estate  a  man  has  in  the  lands  of  his  wife  upon  her  death,  in  case 

a  living  child  has  been  born  to  them  during  their  marriage. 
Damages :   Compensation  in  money  to  be  paid  by  one  person  to  another  for 

an  injury  inflicted  by  the  one  upon  the  other. 
Days  of  Grace :  Days  (usually  three)  allowed  by  custom  for  the  payment  of 

bills  and  notes  beyond  the  day  specified  for  payment  on  the  face  of  them. 
Decree :   The  judgment  or  decision  of  a  court  of  equity. 

Deed :   A  written  agreement  signed,  sealed,  and  delivered  by  which  one  per- 
son conveys  lands  to  another. 
De  Facto :   In  fact,  actually. 
Default :   Omission ;  neglect  or  failure. 

Defendant :   The  party  against  whom  an  action  or  suit  is  brought. 
Demand :    The  request  for  payment  of  a  claim. 

Demise :   A  conveyance  of  an  estate  in  real  property  for  life  or  for  years. 
Deponent :    One  who  makes  oath  as  to  the  truth  of  a  written  statement. 
Deposit :   A  bailment  or  delivery  of  goods  to  be  kept  and  returned  without 

recompense. 
Deviation :   In  the  law  of  marine   insurance,  a  voluntary  departure  without 

necessity  from  the  regular  course  of  the  specific  voyage  insured. 
Devise :   To  grant  by  will. 

Disability  :   Want  of  qualification  ;  incapacity  to  do  a  legal  act. 
DisafG.rmance :  The  annulling  or  canceling  of  a  voidable  contract. 
Discount:    (i)  To  take  interest  in  advance.     (2)  A  deduction  from  a  pnce 

a^ked,  or  from  an  account,  debt,  or  demand. 
Dishonor :  The  non-payment  of  negotiable  paper  when  it  is  due. 
Divorce :   The  separation  of  husband  and  wife  by  decree  of  the  courts. 
Domicile :   The  place  where  a  man  has  his  permanent  home,  and  to  which  he 

intends  to  return  if  absent. 
Dower :   The  right  of  a  widow  to  the  use  or  ownership  of  some  portion  of  the 

real  estate  owned  by  her  husband. 
Draft:    Same  as  bill  of  exchange. 
Drawee :   The  person  upon  whom  a  bill  of  exchange  is  drawn,  and  who  is 

directed  to  make  the  payment. 
Drawer :   The  person  who  draws  or  makes  a  bill  of  exchange. 
Duress :    Personal  restraint  or  compulsion. 
Easement :   The  right  in  the  owner  of  one  piece  of  land  to  use  the  land  of 

another  for  a  particular  purpose. 
Emblements  :   Growing  crops  of  any  kind  produced  by  expense  and  labor. 
Eminent  Domain :   The  right  of  the  sovereign  power  to  take  private  property 

for  pubhc  purposes. 


376  GLOSSARY 

Enact :  To  make  a  law,  or  to  establish  by  law. 

Entail:  To  limit  the  succession  of  real  property;  that  is,  to  control  the 
descent  of  real  property  after  the  death  of  the  owner. 

Equity  of  Redemption  :  The  right  which  a  mortgagor  has  to  redeem  his  estate 
after  the  mortgage  has  become  due. 

Escheat:  The  reverting  of  land  to  the  state  upon  the  death  of  the  owner 
without  lawful  heirs. 

Escrow :  A  deed  or  bond  delivered  to  a  third  party  to  be  held  and  delivered 
to  the  grantee  or  creditor  upon  the  performance  of  some  condition. 

Estate :   An  interest  in  property. 

Estoppel :  A  rule  of  law  which  precludes  a  man  from  denying  certain  facts 
or  conditions  in  consequence  of  his  previous  allegations  or  conduct  or 
admissions. 

Eviction :  The  dispossession  of  a  person  by  process  of  law  from  land  which 
he  has  previously  held. 

Executed  Contract :    One  in  which  nothing  remains  to  be  done  by  either  party. 

Execution:  (i)  A  written  command  issued  to  a  sheriff  or  constable,  after  a 
judgment,  directing  him  to  enforce  it.  (2)  The  act  of  signing  and  seal- 
ing a  legal  instrument,  or  giving  it  the  forni  required  to  make  it  a  valid 
act. 

Executor :   A  person  named  in  a  will  to  carry  out  its  provisions. 

Executory  Contract :  One  in  which  something  remains  to  be  done  on  one  or 
both  sides. 

Ex  post  Facto  Law  :  A  law  which  renders  criminal  an  act  done  previously  and 
I  which  when  done  was  innocent. 

Extradition :  The  surrender  by  one  government  to  another  of  a  person 
charged  with  a  crime. 

Fee  Simple :    Full  ownership  in  lands. 

Firm :   All  the  members  of  a  partnership  taken  collectively. 

Foreclosure  :  The  process  of  cutting  off  the  right  or  interest  of  the  mortgagor 
and  his  assignees  in  mortgaged  premises. 

Forgery  :    The  fraudulent  making  or  altering  of  a  written  instrument. 

Franchise :  A  privilege,  or  right,  conferred  upon  individuals  by  grant  from 
the  government. 

Fraud :  Any  cunning,  deception,  or  artifice  used  to  circumvent,  cheat,  or  de- 
ceive another. 

Freehold :   An  estate  of  inheritance  or  a  life  estate. 

Freight :  The  compensation  to  be  paid  a  carrier  for  the  transportation  of 
goods,  or  the  goods  themselves  while  being  transported. 

Good  Will :  Benefit  arising  from  the  fact  that  persons  used  to  trading  or  doing 
business  at  a  particular  place  will  continue  to  do  so ;  it  is  a  property  sub- 
ject to  transfer. 

Grant :   To  transfer  by  deed. 

Guarantor :   One  who  makes  a  guaranty. 


GLOSSARY 


177 


Guaranty :   A  contract  whereby  one  person  engages  to  be  answerable  for  the 

debt  or  default  of  another  person. 
Guardian :   One  who  is  entitled  to  the  custody  of  the  person  or  property  of  an 

infant  or  one  not  able  to  take  care  of  himself,  as  an  idiot  or  insane  person. 
Guest :   A  person  received  and  entertained  at  an  inn  or  hotel. 
Idiot :   One  who  never  had  reasoning  power. 
In  Statu  Quo  :  In  the  same  state  or  condition  as  before. 
Inchoate:    Incipient;  incomplete. 
Incorporate :    To  form  into  a  corporation. 
Indemnity:   Compensation  for  damage  suffered  or  that  which  is  given  or 

promised  to  a  person  to  prevent  him  from  suffering  damage. 
Indorsee  :    One  to  whom  an  indorsement  is  made. 
Indorsement :   (i)  A  name,  with  or  without  other  words,  written  on  the  back  of 

negotiable  paper.     (2)  The  agreement  implied  in  one's  writing  his  name 

on  the  back  of  negotiable  paper,  to  pay  it  if  the  principal  debtor  does  not. 
Indorsement  in  Blank :   An  indorsement  in  which  the  name  of  the  indorsee  is 

omitted. 
Indorsement  in  Full :   An  indorsement  to  a  definite  person. 
Indorsement  without  Recourse :   An  indorsement  by  which  the  indorser  passes 

the  title  to  the  instrument,  but  does  not  assume  the  liability  of  an  indorser. 
Indorser:    One  who  makes  an  indorsement  on  negotiable  paper. 
Infant :    In  law,  one  under  the  age  of  twenty-one  years. 
Insolvency :   State  of  being  unable  to  pay  one's  debts. 
Insurable  Interest :    Such  an  interest  in  the  thing  insured  that  the  person 

possessing  it  may  be  injured  by  the  risk  to  which  the  thing  insured  is 

exposed. 
Insurance :    A  contract  of  indemnity  against  loss  from  certain  causes. 
Insurer:    The  party  agreeing  to  furnish  insurance. 
Intestate  :    One  who  dies  without  making  a  will. 
Invalid :    Of  no  legal  force. 
Issue :    In  real  property  law,  all  persons  who  have  descended  from  a  common 

ancestor. 
Joint  Stock  Company :   A  species  of  partnership  possessing  some  of  the  char- 
acteristics of  corporations. 
Joint  Tenants :   Two  or  more  persons  to  whom  land  is  conveyed  by  deed  or 

devised  by  will,  the  survivor  taking  the  whole  interest. 
Judgment :    The  final  determination  by  a  court  of  the  rights  of  the  parties  in 

an  action. 
Jurat:   The  certificate  at  the  end  of  an  affidavit  showing  when  and  before 

whom  it  is  sworn. 
Jurisdiction :   The  legal  authority  of  a  court. 
L.S. :   An  abbreviation  of  a  Latin  phrase,  and  means  "the  place  of  the  seal." 

It  now  takes  the  place  of  a  seal  in  some  jurisdictions,  or  denotes  where  a 

seal  is  to  be  affixed. 


378  GLOSSARY 

Landlord :    (i)  One  who  owns  and  rents  or  leases  lands  or  houses.     (2)  The 

keeper  of  an  inn. 
Law  Merchant :   The  general  body  of  usages  in  matters  relative  to  commerce. 
Lease :   A  contract  by  which  one  grants  to  another  for  a  period  the  use  of 

certain  real  estate. 
Legacy :   A  gift  by  will ;  commonly  applied  to  money  or  personal  property. 
Legal  Tender :   That  kind  of  money  which  may  legally  be  oiTered  in  payment 

of  a  debt. 
Lessee :   A  person  to  whom  a  lease  is  made. 
Letters  of  Administration :   An  instrument  issued  out  of  the  court  having 

jurisdiction,  granting  power  to  settle  the  estate  of  one  dying  without 

leaving  a  will. 
Letters  Testamentary :   An  instrument  out  of  the  court  having  jurisdiction, 

granting  power  to  the  person  named  as  executor  in  a  will  to  carry  out  the 

provisions  of  the  will. 
Lien :   A  right  which  one  person  has  to  retain  the  property  of  another  by  way 

of  security  for  a  debt  or  claim. 
Liquidated  Damages :   The  sum  of  money  agreed  by  the  parties  to  a  contract 

in  advance,  to  be  paid  in  case  of  breach. 
Litigation :   A  suit  at  law. 
Lunatics :   Persons  who  have  lost  their  reason. 
Mandamus :   A  writ  issued  by  a  superior  court  to  an  inferior  court  or  to  an 

officer,  commanding  something  to  be  done. 
Mandate :   A  bailment  of  personal  property  in  which  the  bailee  undertakes 

without  compensation  to  do  something  for  the  bailor  with  the  thing 

bailed.     (The  bailor  is  generally  termed  the  mandator,  and  the  Ldilee 

the  mandatary.) 
Maturity  :   The  time  at  which  commercial  paper  legally  becomes  due. 
Merger :   The  absorption  or  extinguishment  of  one  contract  in  another. 
Minor :   Same  as  infant. 
Misrepresentation :   A  false  and  fraudulent  statement  made  by  a  party  to  a 

contract,  relative  to  a  particular  fact,  with  the  knowledge  that  the  state- 
ment is  untrue. 
Mortgage :   A  grant  or  conveyance  of  an  estate  or  property  to  a  creditor  for 

the  security  of  a  debt,  to  become  void  on  payment  of  such  debt.     The 

mortgagor  is  the  one  who  gives  the  mortgage  upon  his  property;  the 

mortgagee  the  one  to  whom  the  mortgage  is  given. 
Municipal  Law :   The  rules  prescribed  by  the  supreme  power  in  a  nation  or 

state. 
Necessaries  :  Such  things  are  as  proper  and  essential  for  the  sustenance  of  man. 
Negotiable  Paper :   An  instrument,  as  a  bill  or  note,  which  may  be  transferred 

from  one  to  another  by  indorsement  or  delivery. 
Nominal  Damages :   Those  given  for  the  violation  of  a  right  from  which  no 

actual  loss  has  resulted. 


GLOSSARY  379 

Non-suit :  The  name  of  a  judgment  given  against  a  pldntiff  when  he  is  un- 
able to  prove  his  case. 
Non-user :   A  failure  to  use  rights  and  privileges. 
Notary  Public :   A  public  officer  whose  principal  function  b  to  administer 

oaths  and  take  acknowledgments. 
Notice  of  Protest :   A  notice  given  by  the  holder  of  a  bill  or  note  to  the  drawer 

or  indorser,  that  the  bill  has  been  protested  for  refusal  of  payment  or 

acceptance. 
Nuisance :   Anything  that  unlawfully  injures  or  damages  a  person  in  the  en- 
joyment of  life  and  property. 
Oath :   A  pledge  given  by  the  person  taking  it  that  his  promise  is  made  under 

an  immediate  sense  of  his  responsibility  to  God. 
Offeree :   One  to  whom  an  offer  is  made. 
Offeror :   One  who  makes  an  offer. 
Open  Policy :   An  insurance  policy  in  which  there  is  no  valuation  of  the  thing 

insured. 
Oral  Contract :   A  contract  made  by  means  of  spoken  words. 
Ordinance :   A  rule,  or  order,  or  law.     Usually  applied  to  the  acts  or  laws 

passed  by  the  common  council  of  a  city. 
Outlawed :  A  debt  is  said  to  be  outlawed  when  it  Is  barred  by  the  statute  of 

limitations. 
Par :   Equality  of  value.     Bills  of  exchange  and  stocks  are  at  par  when  they 

sell  for  their  face  value.     They  are  above  or  below  par  when  they  are 

worth  more  or  less  than  their  face  value. 
Paramount  Title :   In  real  property  law,  denotes  the  superior  or  better  title. 

The  title  which  will  prevail  when  a  dispute  as  to  ownership  arises. 
Parol  Contract :   Any  agreement  not  under  seal.     It  is  often  used  as  synony- 

rnous  with  oral  contract. 
Partnership :   The  relationship  resulting  from  an  agreement  between  two  or 

more  persons  to  place  their  money,  effects,  labor,  and  skill,  or  some  or  all 

of  them,  in  some  enterprise  or  business,  and  divide  the  profits  and  bear 

the  losses  in  certain  proportions. 
Party  Wall :   A  wall  common  to  two  adjoining  estates. 
Pawn :  A  sale  of  personal  property  on  condition  that  it  may  be  redeemed 

within  a  certain  time. 
Payee :   The  person  to  whom  the  payment  of  any  kind  of  commercial  paper  is 

directed  to  be  made. 
Perjury :   A  willfully  false  statement  by  one  who  is  lawfully  sworn  and  required 

to  tell  the  truth,  made  in  a  judicial  proceeding  and  in  relation  to  a  matter 

that  is  material  to  the  point  in  question. 
Per  Se :   In  itself 
Personal  Property :   Such  things  as  are  movable,  and  that  may  be  taken  by  the 

owner  wherever  he  goes. 
Plaintiff :  The  person  who  brings  a  suit  at  law. 


38o  GLOSSARY 

Pledge :  A  bailment  of  personal  property  to  secure  the  pajrment  of  some  debt 

or  the  fulfillment  of  some  agreement. 
Pledgee :   The  bailee  of  personal  property  under  a  pledge. 
Pledgor :   The  bailor  of  personal  property  under  a  pledge. 
Policy :   The  written  contract  of  insurance. 
Post-dated :    Having  a  date  subsequent  to  that  at  which  the  agreement  is 

actually  made. 
Post-mortem :   After  death. 

Power  of  Attorney  :   A  written  instrument  under  seal  by  which  one  party  ap- 
points another  to  act  for  him. 
Premium :    The  consideration  or  price  paid  for  insurance. 
Presumption :   An  inference  of  the  law,  from  certain  facts,  of  the  existence  or 

truth  of  some  other  fact  or  proposition. 
Probate  :   The  act  or  process  of  proving  a  will. 
Promisee  :   One  to  whom  a  promise  is  made. 
Promisor :    One  who  makes  a  promise. 
Prima  Facie :   Literally,  at  the  first  appearance.     Prima  facie  evidence  is  that 

which  is  sufllicient  to  establish  a  fact  unless  it  be  rebutted  or  contradicted. 
Principal:    (i)  A  party  for  whom  another  is  authorized   to  do  certain  acts 

with  third  parties.     (2)  A  sum  of  money  at  interest. 
Promissory  Note :   A  written  promise,  signed  by  the  party  promising  to  pay 

a  certain  sum  of  money  at  a  certain  time  to  a  person  named,  or  to  his 

order,  or  to  the  bearer. 
Prosecute :   To  proceed  against  by  legal  measures. 
Protest :   A  formal  declaration  in  writing  by  a  notary  public  of  the  demand 

and  refusal  to  pay  a  note  or  bill. 
Proxy:    (i)    One  who  represents   another.     (2)   A  writing   by  which  one 

authorizes  another  to  vote  in  his  place. 
Public  Enemies  :   Those  who  belong  to  a  nation  at  war  with  another. 
Public  Policy :   The  principles  under  which  the  freedom  of  contract  or  private 

dealing  is  restricted  by  law  for  the  good  of  the  community. 
Quantum  Meruit :   As  much  as  he  deserves. 
Quasi :   As  if ;  analogous  to.    (Quasi  corporations  are  bodies  like  corporations, 

and  yet  are  not  strictly  corporations.) 
Quitclaim  Deed :   A  form  of  deed  in  the  nature  of  a  release. 
Ratification :   Giving  force  to  a  contract  which  otherwise  is  not  binding. 
Real  Estate :  Same  as  real  property. 
Real  Property :   That  which  is  fixed  or  immovable,  and  includes  land  and 

whatever  is  erected  or  growing  on  it,  together  with  what  is  beneath  or 

above  the  surface. 
Realty :    Same  as  real  property. 
Receiver :   Usually  a  person  appointed  by  a  court  to  take  and  hold  property 

in  dispute,  the  property  of  an  insolvent,  or  the  property  of  a  dissolved 

corporation. 


GLOSSARY  381 

Recoupment :  A  reduction  or  diminution  of  damages  on  account  of  a  breach 

of  warranty  or  defects  in  performance. 
Release :   An  instrument  in  tlie  general  form  of  a  deed  that  in  distinct  terms 

remits  tlie  claim  to  which  it  refers,  and  being  under  seal,  although  reciting 

only  a  nominal  consideration,  extinguishes  the  debt. 
Remainder :  An  estate  in  real  property  to  take  effect  after  another's  estate  is 

terminated. 
Remedy:   The  legal  means  employed  to  enforce  a  right  or  redress  an  injury. 
Rent :    Compensation  for  use  of  real  property. 
Replevin :   An  action  to  recover  the  possession  of  goods  wrongfully  taken  and 

retained. 
Rescission :   The  annulling  or  dissolution  of  contracts  by  mutual  consent  or 

by  one  party. 
Residence :   The  place  where  a  man  makes  his  home,  or  where  he  has  dwelt 

permanently  for  a  considerable  length  of  time. 
Residuary  Devisee :   The  person  named  in  a  will  who  is  to  take  all  the  real 

property  remaining  after  all  of  the  other  devises  are  paid. 
Residuary  Legatee :    The  person  named  in  a  will  who  has  the  residue  of  the 

personal  property  after  the  payment  of  the  other  legacies  specifically  men- 
tioned in  the  will. 
Revert :   To  fall  again  into  the  possession  of  the  donor,  or  of  the  former 

proprietor. 
Right  of  Survivorship :   The  right  that  the  survivor  or  survivors  have  to  take 

the  interest  of  their  deceased  joint  tenant,  which  in  other  cases  would  go 

to  his  heirs. 
S.S.:   Abbreviation  for  the  Latin  word  "Scilicet,"  meaning  to  wit;  that  is, 

to  say. 
Sale :   The  transfer  of  the  ownership  in  property  for  a  price  in  money. 
Satisfaction :   Payment  of  a  legal  debt  or  demand ;  the  discharging  or  cancel- 
ing of  a  judgment  or  a  mortgage,  by  paying  the  amount  of  it. 
Seal:   An  impression  upon  any  impressible  substance,  or  a  piece  of  paper 

pasted  on  with  intent  to  make  a  seal  of  it. 
Seaworthiness:   The  fitness  of  a  vessel  in  all  respects  of  materials,  equipment, 

and  construction  for  the  service  in  which  it  is  employed. 
Set-eff :   A  claim  which  one  party  has  against  another  who  has  a  claim  against 

him ;  a  counter-claim. 
Severance :   The  removal  of  fixtures  from  the  land. 
Shipper :   One  who  gives  merchandise  to  another  for  transportation. 
Simple  Contract :    A  contract,  either  oral  or  written,  which  is  not  under  seal. 
Special  Partner :   One  who  invests  capital  in  a  partnership,  and  is  liable  for  its 

debts  only  to  the  extent  of  his  investment. 
Specialty :    A  contract  under  seal. 
Specific  Performance :    Performance  of  a  contract  according  to  its  precise 

terms.    It  b  frequently  compelled  by  a  court  of  equity. 


382  GLOSSARY 

Statute :    An  act  of  the  legislature. 

Statute  of  Frauds :   An  English  statute,  generally  reenacted  in  this  country, 

requiring  certain  contracts  to  be  made  in  writing,  designed  to  prevent 

fraud  and  perjury. 
Statute  of  Limitations  :  A  statute  requiring  an  action  to  be  commenced  within 

a  certain  time  after  the  demand  has  arisen.     It  limits  the  time  to  sue, 

hence  its  name. 
Stock :   Same  as  capital  stock.    It  is  also  used  to  denote  the  shares  into  which 

the  capital  stock  is  divided. 
Stockholder :   The  owner  of  one  or  more  shares  of  the  stock  of  a  corporation. 
Stoppage  in  Transitu :   A  stoppage  by  the  seller  of  goods  sold  on  credit  before 

they  reach  their  destination  upon  his  learning  of  the  buyer's  insolvency. 
Subagent :   A  person  appointed  by  an  agent  to  perform  some  duty  relating 

to  the  agency. 
Subcontract :   A  contract  made  by  one  who  has  agreed  with  a  third  party  to 

perform  labor  or  services,  for  the  whole  or  part  performance  of  that  labor 

or  service. 
Subpoena :   A  writ  commanding  the  attendance  of  a  person  in  court. 
Subrogation :   The  substitution  of  one  person  or  thing  in  the  place  of  another, 

particularly  the  substitution  of  one  person  in  the  place  of  another  as  a 

creditor,  with  a  succession  to  the  rights  of  the  latter. 
Suit :   The  prosecution  of  some  claim  or  demand  in  a  court  of  justice. 
Summons  :   A  writ  directed  to  a  sheriff  or  other  officer,  requiring  him  to  notify 

the  person  named  that  an  action  has  been  commenced  against  him  in  the 

court  from  which  the  writ  issues,  and  that  he  is  required  to  appear  upon 

a  certain  day  and  answer  the  complaint  in  such  action. 
Surety :   One  who  has  agreed  with  another  to  make  himself  responsible  for 

the  debt,  default,  or  misconduct  of  a  third  party.     Similar  to  guarantor. 
Tenant :   One  to  whom  another  has  granted  for  a  period  the  use  of  certain 

real  estate. 
Tender:  An  offer  of  a  sum  of  money  in  satisfaction  of  a  debt  or  claim,  by 

producing  and  offering  the  amount  to  the  creditor  and  declaring  a  willing- 
ness to  pay  it. 
Testator:  A  person  who  makes  a  will. 
Tort :   A  private  wrong  or  injury,  other  than  that  arising  from  the  breach  of  a 

contract,  for  which  damages  can  be  collected. 
Trade-mark :    The  symbol,  emblem,  or  mark  which  a  manufacturer  puts  upon 

the  goods  he  manufactures. 
Trespass :  Any  wrongful  act  of  one  person  whereby  another  is  injured. 
Trustee :   One  who  holds  property  for  the  benefit  of  another. 
Uberrima  Fides  :   The  most  perfect  good  faith. 
Ultra  Vires :  The  acts  or  proceedings  of  a  corporation  done  beyond  the  scope 

of  its  powers. 
Underwriter :  Same  as  insurer. 


i 


SLOSSARV  383 

TTsury :   Illegal  interest. 

Validity :  Legal  strength  or  force ;  the  quality  of  being  good  in  law. 

Vendee :   One  to  whom  anything  is  sold ;  a  purchaser ;  a  buyer. 

Vendor:   A  seller;  the  person  who  sells  a  thing. 

Verbal :   Parol,  by  word  of  mouth. 

Verdict :   The  finding  of  a  jury  reported  to  the  court. 

Vested :   Already  in  force. 

Void :   Of  no  force  or  effect. 

Voidable :   That  may  be  avoided ;  not  absolutely  void. 

Waiver :   The  abandonment  of  a  right,  or  a  refusal  to  accept  it. 

Ward:   A  minor  under  guardianship. 

Warranty :  An  agreement  to  hold  one's  self  responsible,  if  a  certain  thing 
does  not  turn  out  as  represented. 

Waste :   Damage  or  destruction  done  or  permitted  to  land  or  trees  by  a  tenant. 

Wharfinger :  The  owner  of  a  wharf  who  maintains  it  for  the  purpose  of  receiv- 
ing and  shipping  merchandise. 

Will :  An  instrument  by  which  a  person  disposes  of  his  property,  to  take  effect 
after  his  death. 

Writ:  A  precept  in  writing  issued  from  a  court,  either  as  the  commencement 
of  a  suit  or  incidental  to  its  progress,  and  requiring  the  performance  of  a 
certain  act  or  giving  authority  to  do  it. 


ABBREVIATIONS 


Abb.  N.  C.     .        .  ...  Abbott's  New  Cases. 

Ala. Alabama. 

App.  Div Appellate  Division. 

Ark Arkansas. 

A.  &E Adolphus  &  Ellis. 

Barb Barbour. 

Blatchf. Blatchford. 

•  B.  &  C Barnewell  &  Creswell. 

Cal California. 

Can Canada. 

Ch.  Div.  ......  Chancery  Division. 

Conn Connecticut, 

Cush Cushing. 

C.  &  P. Carrington  &  Payne. 

Del Delaware. 

Eng English. 

Exch Exchequer. 

Fed.  Rep.       ......  Federal  Reporter. 

Fla Florida. 

Ga. Georgia. 

*  Harr Harrington. 

.  Heisk Heiskell. 

How Howard. 

Humph.  ......  Humphrey. 

H.  L.  C. House  of  Lords  Cases. 

Ill Illinois. 

Ind.        . Indiana. 

Johns Johnson. 

Kans Kansas. 

Ky Kentucky. 

La. Louisiana. 

La.  An. Louisiana  Annual. 

Ld.  Ra)miond Lord  Raymond. 

L.  R.  Q.  B Law  Reports,  Queen's  Bench. 

L.  T,  N.  S Law  Times,  New  Series. 

Mass.      .......  Massachusetts. 

Md Maryland. 

COM.  LAW  —  25  385 


386  ABBREVIATIONS 

Me Maine. 

Met.  or  Mete Metcalf. 

Mich Michigan. 

Minn Minnesota. 

Miss.       .......  Mississippi. 

Mo Missouri. 

Mo.  App Missouri  Appeal. 

M.  &  W. Meeson  &  Welsby. 

Neb Nebraska. 

JJ.C North  Carolina. 

N.H New  Hampshire. 

N.J.  Eq New  Jersey  Equity. 

N.J.  L New  Jersey  Law. 

N.Y New  York. 

Ohio  St Ohio  State. 

Ont Ontario. 

Ore. Oregon. 

Pa. Pennsylvania. 

Pa.  St Pennsylvania  State. 

Paige  Ch Paige's  Chancery. 

Pick Pickering. 

Q.  B Queen's  Bench. 

Q.  B.  D. Queen's  Bench  Division 

R.I Rhode  Island. 

Sandf.  Ch Sandford's  Chancery. 

S.C South  Carolina. 

Tenn Tennessee. 

Tex Texas. 

Tex.  Civ.  App Texas  Civil  Appeal 

T.  &  C Thompson  &  Cook. 

U.S United  States. 

Va. Virginia. 

Vt.  .......  Vermont. 

Wall Wallace. 

Wend Wendell. 

Wis Wisconsin. 

W.  Black Wm.  Blackstone. 

W.  Va.  .        .  .        .        .        .  West  Virginia. 


INDEX 


Absolute  property,  85. 
Abstract  of  title,  300. 
Acceptance,  25. 

bill  of  exchange,  131. 

of  deed,  306. 

for  honor,  132. 

how  made,  27. 

must  be  communicated,  26. 

supra  protest,  132. 

virtual,  133. 

when  binding,  27. 
Accident  insurance,  283. 
Accommodation  paper,  147. 
Accord  and  satisfaction,  32. 
Acknowledgment,  307. 
Act  of  God,  loss  by,  206. 
Action,  342. 

Actions,  table  of  limitations  of,  351. 
Agency,  159. 

coupled  with  an  interest,  175. 

created  by  necessity,  164. 

created  by  ratification,  163. 

questions,  177. 

relation  of  principal  and  agent,  160. 

termination  of,  174. 
Agents,  authority  to  execute  instrument 
under  seal,  161. 

can  renounce  agency,  176. 

classes  of,  159. 

compensation  of,  165. 

defined,  159. 

fraud  and  negligence  o^  171, 

general,  159. 

gratuitous,  169. 

how  appointed,  161. 

malicious  wrongs  of,  172. 

must  exercise  judgment,  166. 

must  obey  instructions,  i66. 

negligence  of,  172. 


Agents,  notice  to,  171. 

obligation  to  principal,  166. 

obligation  to  third  party,  173. 

scope  of  authority,  170. 

special,  i6o. 

when   written   appointment    required, 
161. 
Alienation  clause,  fire  insurance  policy, 

272. 
Alteration  of  negotiable  instruments,  151. 

of  written  instruments,  65. 
Annexation  to  the  realty,  87. 
Anomalous  indorser,  146. 
Answer,  344. 
Appeal,  333,  347. 
Appellate  division,  340. 
Approval,  sale  on,  loi. 
Articles  of  copartnership,  form,  222. 
Assignment,  of  fire  insurance  policy,  272. 

of  lease,  326. 

of  mortgage,  316. 

of  mortgage,  form,  319. 

of  rights  under  contracts,  51, 

of  stock,  form,  259. 
Attachment,  348. 

B 

Baggage,  214. 

when  carrier's  liability  terminates,  215. 
Bailee,  defined,  180. 
liability   of,   in  bailment   for  bailee's 

benefit,  188. 
liability  of,  gratuitous,  184. 
liability  of,  in  mutual  benefit  bailment 

191. 
liability  of,  may  be  varied  by  contract, 

183. 
lien  of,  193. 
may  use,  in  bailment  for  bailee's  benefit, 

189. 
tortious,  183.    - 


^87 


388 


INDEX 


Bailment,  i8o. 

classification,  i8i. 

degrees  of  care  and  diligence,  l8l. 

distinguished  from  sale,  85. 

exceptional,  197. 

for  bailee's  sole  benefit,  187. 

for  bailor's  sole  benefit,  183. 

hired  service  about  a  chattel,  190. 

hired  use  of  chattel,  194. 

for  mutual  benefit,  190. 

ordinary  and  exceptional,  181. 

pledge  or  pawn,  194. 

questions,  216. 

redelivery,  193. 
Bailor  defined,  1 80. 
Bank  draft,  128. 

form,  129. 
BanK  note,  form,  139. 
Bankrupt,  duties  of,  67. 
[bankruptcy,  66. 

acts  of,  67. 

discharge  in,  68. 

dissolves  a  partnership,  242. 

effect  on  contracts,  52. 

exemptions  in,  67. 

meeting  of  creditors,  68. 

of  party  terminates  agency,  177. 

trustee,  68. 

who  may  avail  themselves  of,  66. 
Barter,  84. 
Bill  of  exchange,  128. 

acceptance,  131. 

acceptance  for  honor^  132. 

dishonor,  132. 

foreign,  129. 

form,  128,  13a 

inland,  129. 

presentment,  131. 

virtual  acceptance,  133. 
Bill  of  lading,  206. 
Bill  of  sale,  contents  of,  99. 

form,  98. 
Blank  indorsement,  136. 
Boarding-house  keepers,  197. 
Bona  fide  holder  for  value,  148. 
Bond,  316. 

form,  317. 
Breach    of  contract,  by  failure   to   per- 
form, 71. 

by  making  performance  impossible,  70. 


Breach  of  contract,  by  renouncing  liabil- 
ity, 69. 
Breach,  discharge  of  contract  by,  69. 
By-laws  of  corporation,  250. 


Cancellation  of  fire  insurance  policy,  273. 
Capital  of  partnership,  230. 
Care  or  diligence,  degrees  of,   in  bail- 
ment, 181. 
Carrier,  see  Common  Carrier,  200, 
Cases,  explanatory  note,  12. 
Casualty  insurance,  283. 
Caveat  emptor,  39,  106. 
Certificate  of  stock,  form,  245, 
Certified  check,  135. 
Chattel  mortgage,  loi, 

filing  of,  102. 

foreclosure,  104. 

form,  103. 

requirements  of,  I02. 

table,  363.  ^ 
Check,  133. 

certified,  135. 

form,  133. 

must  be  presented  without  delay,  134. 
Circuit  Court,  339. 

of  appeals  of  United  States,  337. 

of  the  United  States,  336. 
Civil  Courts,  334. 
Civil  law,  9. 

Coal,  real  or  personal  property,  56(1 
Collateral  security,  195. 
Commercial  law  defined,  XO, 
Common  carrier,  200. 

compensation,  202. 

delivery,  21 1. 

liability  of,  206. 

liability  for  baggage,  214. 

lien  of,  202. 

limitation    of    liability    by   contract, 
2og. 

limits  of  liability,  206. 

loss  arising  from  nature  of  goods,  209. 

loss  by  act  of  God,  206. 

loss  by  act  or  fault  of  consignor,  208. 

loss  caused  by  public  authority,  209. 

loss  l)y  fire,  207, 

loss  l)y  public  enemy,  207. 

of  passengers,  213. 


INDEX 


389 


Common   carrier,   of  passengers,  rights 
and  duties,  213. 

of  passengers,  when  liability  for  bag- 
gage terminates,  215. 

receipt,  206. 

right  to  refuse  goods,  204. 

when  liability  begins,  205. 
Common  law,  9. 

courts,  334. 
Common  stock,  258. 
Compensation,  of  agent,  165, 

of  a  partner,  232. 
Complaint,  343. 
Compound  interest,  156. 
Compromise  with  creditors,  33. 
Concealment  in  life  insurance,  277. 
Condition,  in  contract,  72, 

in  contract  of  sale,  99,  104. 
Conditional  contract,  filing  of,  lOO. 

of  sale,  99. 
Consideration,  compromise,  2,2,. 

contracts  under  seal,  14. 

in  executed  contract,  29. 

in  executory  contract,  29. 

extension  of  time,  33. 

for  gift,  29. 

good,  33. 

moral  obligation,  33. 

must  be  legal,  34. 

must  be  possible,  34. 

must  be  present  or  future,  35. 

paynjent  of  less  amount,  31. 

promise  may  be  sufficient,  31. 

settlement  to  avoid  litigation,  33. 

valuable,  33. 
Constitution,  defined,  8. 

United  States,  10. 
Constitutional  law,  8. 
Contempt  of  court,  345. 
Contract,  against  public  policy,  46. 

assignment  of  rights  under,  5 1. 

consideration,  29. 

defined,  12. 

discharge  of,  60. 

of  drunkard,  23. 

entire  and  divisible,  71, 

executed,  12. 

executory,  12. 

express,  15. 

filing  conditional,  100, 


Contract,  formal,  13. 
implied,  15. 

in  restraint  of  trade,  48. 
of  insane  person,  21. 
made  on  Sunday,  46. 
of  married  women,  23. 
necessary  conditions  of,  12. 
not  to  be  performed  within  one  year, 

57- 

object  must  be  legal,  44. 

of  infants,  1 7. 

of  sale,  95. 

of  sale,  in  writing,  99, 

of  wager  void,  46. 

operation  of,  50.       ^ 

oral,  15. 

parties  acquiring  under,  50, 

parties  necessary,  15. 

questions,  76. 

simple,  13. 

subject-matter,  44. 

uberrima  fides,  40. 

under  seal,  14. 

waiver  or  rescission  of,  60. 

written,  15, 
Copartnership,  see  Partnership,  221. 
Corporate,  name,  250. 

seal,  250. 
Corporation,  247. 

by-laws,  250. 

common  and  preferred  stock,  258. 

directors,  261. 

dissolution,  254. 

dividends,  258. 

form  of  assignment  of  stock,  259. 

formation  of,  251. 

implied  powers,  252. 

liability  for  acts  of  agents,  254. 

liability  of  stockholders,  251,  261. 

management,  260. 

membership,  257. 

method  of  dissolution,  257. 

notice  of  meeting  of  stockholders,  260. 

power  to  hold  real  estate,  250. 

powers  and  liabilities,  252. 

private,  248. 

private  stock  corporation,  249. 

public,  248. 

questions,  262. 

rights  of  creditors  of,  261. 


390 


INDEX 


Corporation,  stock  and  non-stock,  249. 

stockholder  in,  257. 

transfer  of  stock,  259. 

ultra  vires  acts,  254. 

vote  of  stockholders,  260. 
Corporeal  real  property,  291. 
Costs,  346. 
Counterclaim,  344. 
Counterfeit  money,  not  payment,  63. 
County  Court,  339. 
Court,  of  Appeals,  340. 

Circuit  Court   of  Appeals  of  United 
States,  337. 

Circuit  or  Supreme,  339. 

of  Claims,  340. 

County,  339. 

Justice,  338. 

Municipal  or  City,  338. 

Police  or  Magistrate's,  338. 

Surrogate's  or  Probate,  339. 

United  States  Circuit,  336. 

United  States  District,  335. 

United  States  Supreme,  337. 
Courts,  332. 

of  appellate  jurisdiction,  333. 

civil,  334. 

classification  of,  333. 

common  law,  334. 

criminal,  334. 

equity,  334. 

of  general  jurisdiction,  334, 

jurisdiction  of,  332. 

not  of  record,  334. 

of  original  jurisdiction,  333. 

of  both  original  and  appellate  jurisdic- 
tion, 333. 

questions,  341. 

of  record,  334. 

of  special  jurisdiction,  334. 

state,  338. 
Covenants,  in  deed,  308. 

in  a  lease,  322. 

in  lease,  express  and  implied,  324. 
Coverture,  estate  during,  296. 
Credit  insurance,  285. 
Criminal  Courts,  334. 
Criminal  law,  9. 

Crops,  real  or  personal  property,  56. 
Curtesy,  296. 
Customs  of  merchants,  116. 


Damages,  73. 
Days  of  grace,  141. 

table,  355. 
Death,  effect  on  contract,  52. 

of  partner  dissolves  partnership,  240. 

of  party  terminates  agency,  1 76. 
Declaration,  343. 
Deed,  302. 

acknowledgment,  307. 

conditions,  304. 

covenant  against  grantor,  310. 

covenant  against  incumbrance,  309. 

covenant  of  further  assurance,  310. 

covenant  of  quiet  enjoyment,  309. 

covenant  of  seizin,  308. 

covenant  of  warranty  of  title,  310. 

date  and  seal,  305. 

delivery  and  acceptance  of,  306. 

delivery  in  escrow,  306. 

description  in,  305. 

granting  clause,  304. 

habendum  clause,  305. 

property  to  be  conveyed,  304. 

quitclaim,  310. 

quitclaim,  form,  311. 

recording,  307. 

signing,  306. 

testimonium  clause,  306. 

warranties  in,  308. 

warranty,  form,  303. 

words  of  conveyance,  304. 
Defeasance  clause,  mortgage,  313. 
Defendant,  342. 
Deficiency  judgment,  318. 
Delivery,  by  common  carrier,  211. 

of  deed,  306. 

in  escrow,  306. 

in  sale  of  personal  property,  108. 

want  of,  in  negotiable  instruments,  150. 
Demand,  negotiable  instruments,  138. 
Demurrer,  344. 
Deposit,  183. 
Deposition,  346. 
Description,  sale  by,  107. 
Deviation,  marine  insurance,  281. 
Directors  of  corporations,  261. 
Discharge,  in  bankruptcy,  68. 

of  contract,  60. 

of  contract  by  bankruptcy,  66. 


J 


INDEX 


391 


Discharge,  of   contract    by   agreement, 
60. 

of  contract  by  alteration  of  written  in- 
strument, 65. 

of  contract  by  breach,  69. 
\         of  contract,  impossibility  of  perform- 
ance, 64. 

of  contract  by  operation  of  law,  65. 

of  contract  by  performance,  61. 

of  indorsee  of  negotiable  instruments, 

154. 
of  mortgage,  320. 
of  mortgage,  form,  320. 
of  negotiable  instruments,  153. 
of  promissory  note,  127. 
of  right  of  action,  74. 
Dishonor,  of  bill  of  exchange,  132. 

of  negotiable  instruments,  notice   of, 

143- 
Dissolution  of  corporation,  254. 

by  expiration  of  charter,  255. 

by  forfeiture,  256. 

by  repeal  of  charter,  255. 

by  surrender  of  charter,  255. 

method  of,  257. 
Dissolution  of  partnership,  237. 

by  act  of  partner,  238. 

by  bankruptcy,  242. 

by  change  in  membership,  238. 

by  contract,  237. 

by  death  of  partner,  240. 

by  decree  of  court,  241. 

by  mutual  consent,  238. 
District   Court    of   the    United    States, 

335- 
Dividends  of  corporation,  258. 
Divisible  contracts,  71. 
Dormant  partner,  226. 
Dower,  297. 
Drafts,  time  and  sight,  130. 
Drawer,  obligation  of,  137. 
Drunkenness,  23. 
Duress,  43. 

E 

Easement,  291. 
Ecclesiastical  law,  8. 
Elevator  insurance,  286. 
Emblements,  295. 
Eminent  domain,  292. 


Employer's  liability  insurance,  284. 

Endowment,  life  insurance,  275. 

Entire  contract,  71. 

Equitable  estate,  299. 

Equities  in  negotiable  instruments,  152. 

Equity,  9. 

Courts,  334. 

of  redemption  in  mortgage,  312. 

term,  340. 
Estate,  by  curtesy,  296. 

during  coverture,  296. 

equitable,  299. 

in  fee  simple,  292. 

in  land,  292. 

in  land,  homestead,  298. 

hfe,  293. 

by  marriage,  296. 

by  marriage,  dower,  297. 

in  severalty  and  joint  estates,  299. 

for  years,  321. 
Eviction  of  tenant,  327. 
Evidence,  345. 

Exceptional  bailments,  181,  197. 
Executed  contract,  12. 

consideration,  29. 
Execution,  346. 
Executory  contract,  12. 

consideration,  29. 

when  title  passes  in  sale,  96. 
Exemption,  347. 

in  bankruptcy,  67. 

homestead,  298. 

laws,  table,  359. 
Express  and  implied  covenants  in  lease, 

324- 
Express  contract,  15. 
Ejspress  warranties,  104. 


Fact,  questions  of,  345. 

Factor  may  sell,  94. 

Federal  courts,  334. 

Fee  simple,  estate,  292. 

Felony,  339. 

Feudal  .system,  292. 

Fidelity  insurance,  285. 

Fiduciary  relation  between  principal  and 

agent,  167. 
Filing,  chattel  mortgage,  I02. 
conditional  contract,  icxj. 


392 


INDEX 


Fire,  insurance,  265. 

insurance  policy,  270. 

loss  by,  207. 
Fixtures,  86. 

relation  of  parties,  91. 

right  of  a  tenant  to  remove,  91. 

when  must  be  removed,  92. 
Foreclosure,  chattel  mortgage,  104. 

mortgage,  318. 
Foreign  bill  of  exchange,  129. 

form,  130. 
Forgery  of  negotiable  instruments,  151. 
Form,  articles  of  copartnership,  222. 

assignment  of  mortgage,  319. 

assignment  of  stock,  259. 

bank  draft,  129. 

bank  note,  139. 

bill  of  exchange,'  128. 

bill  of  sale,  98. 

bond,  317. 

certificate  of  protest,  145. 

certificate  of  stock,  249. 

chattel  mortgage,  103. 

check,  133. 

discharge  of  mortgage,  320, 

foreign  bill  of  exchange,  130. 

inland  bill  of  exchange,  1 29. 

joint    and    several    promissory    note, 
125. 

land  contract,  301. 

lease,  323. 

mortgage,  314. 

notice  of  protest,  146. 

power  of  attorney,  162. 

promissory  note,  124. 

quitclaim  deed,  31 1. 

sight  draft,  130. 

summons,  343. 

warranty  deed,  303. 
Formal  contracts,  13. 
Fraud,  38. 

actual,  38. 

concealed,  39. 

in  contract  of  insurance,  268. 

grounds  for  action,  42. 

liability  of  partners  for,  236. 

in  marine  insurance,  280. 

of  agents,  171. 
Freight,  202. 

receipt,  206. 


Full  indorsement,  136. 

Further  assurance,  covenant  of,  310. 


Garnishment,  348. 
General  agents,  159. 
Gift,  84. 

consideration  of,  29. 
Glossary,  371. 
God,  act  of,  206. 
Good  consideration,  33. 
Good  will  of  partnership,  230. 
Goods,  202. 

Goods,  wares  and  merchandise,  58. 
Grace,  days  of,  141. 
Grass,  real  or  personal  property,  56. 
Gratuitous,  agents,  169. 

bailee,  degree  of  care  required  of,  186. 

bailee,  liability  of,  184. 

bailee,  use  of  property  by,  186. 

bailment,  termination  of,  187. 
Guaranty  insurance,  285. 
Guests,  198. 

H 

Habendum,  305. 

Heir,  in  conveyance,  304. 

Hired,  service  about  a  chattel,  190. 

use  of  a  chattel,  194. 
Holder  for  value   of  negotiable  instru- 
ments, 147,  149. 
Homestead,  298. 
Hotel  keeper,  197. 


Ice,  to  whom  belongs,  291. 
Illegal  object  of  contract,  45. 
Implied,  contracts,  15. 

covenants  in  lease,  324. 

partnership,  225. 

powers  of  corporation,  252. 

warranty,  105. 
Incorporation,  251. 
Incorporeal  real  property,  291. 
Incumbrances,  covenant  against,  309. 
Individual  liability  of  partners,  231. 
Indorsement,  blank  and  full,  136. 

how  made,  1 38. 

of  negotiable  instruments,  136. 

without  recourse,  137. 


INDEX 


393 


Indorser,  anomalous,  146. 

discharge  of,  154. 

irregular,  146. 

notice  to,  144. 

obligation  of,  137. 

payment  by,  154. 
Inevitable    accident    in    bailment,    loss 

by,  189. 
Infancy,  16. 

Infant's    contracts,    affirmance    of    exe- 
cuted, 18. 

affirmance  of  executory,  18. 

for  necessaries,  20. 

void,  19. 

voidable,  17. 

who  may  disaffirm,  17. 
■  Injunction,  73. 
Inland  bill  of  exchange,  129. 

form,  129. 
Innkeeper,  197. 

guests  of,  198. 

liability  of,  198. 

lien,  200. 

limitation  of  liability,  199. 

termination  of  relation,  200. 
Insane    person,  liable    for    necessaries, 
22. 

lucid  interval,  22. 
Insanity,  21. 

of  party  terminates  agency,  176. 
Installment  sale,  99. 
Si       Insurable  interest,  fire,  265. 

life,  275. 

marine,  280. 
Insurance,  265. 

accident,  283. 

casualty,  283. 

credit,  285. 

description  of  property  insured,  267. 

effect  of  fraud,  268. 

elevator,  286. 

employer's  liability,  284. 

fidelity  or  guaranty,  285. 

fire,  265. 

fire  policy,  270. 

form  of  contract,  267. 

life,  274. 

marine,  280. 

plate  glass,  286. 

premium,  265. 


Insurance,  questions,  286. 

representation,  268. 

steam  boiler,  286. 

title,  285. 

warranty,  269. 
Interest,  154. 

compound,  156, 

table,  353. 

on  what  claims  allowed,  155. 
International  law,  7. 

Interstate  commerce  commissioners,  205. 
Interstate  commerce  law,  204. 
Involuntary  bankruptcy,  66. 
Irregular  indorser,  146. 


Joint  estates,  299. 
promissory  note,  1 24. 
and  several  promissory  note,  124. 
and    several    promissory    note,   form, 

125- 

stock  company,  242. 

tenants,  299, 
Judgment,  346. 

deficiency,  318. 

discharge  of  right  of  action  by,  74. 
Jurisdiction,  of  court,  332. 

of  the  person,  333, 

of  subject-matter,  332. 
Jury,  345. 
Justice  Court,  338. 


Land  contract,  55,  299. 

form,  301. 
Land,  estate  in,  292. 
Landlord  and  tenant,  321. 

assigning  and  subletting  lease,  326, 

eviction,  327. 

rights  and  liabilities  of,  325. 
Law,  civil,  9. 

commercial,  10. 

common,  o. 

constitutional,  S. 

criminal,  9. 

definition  of,  7. 

ecclesiastical,  8. 

international,  7. 

moral,  7. 

municipal,  8. 


394 


INDEX 


Law,  questions  of,  345. 

sources  of,  10. 

statute,  10. 

unwritten,  10. 

written,  10. 
Lawyers,  346. 
Lease,  assigning  and  subletting,  326. 

covenants  in,  322. 

express  and  implied  covenants,  324. 

form,  323. 

of  land  when  required  to  be  in  writ- 
ing. 57- 

real  property,  321. 

rights  and  liabilities  under,  325. 

term  of,  322. 
Legal  tender,  63. 
Legality    of  voyage,  marine   insurance, 

282. 
Levy  and  sale,  347. 
Liability,  of  common  carrier,  206. 

of  common  carrier  begins,  205. 

of  common  carrier  limited  by  contract, 
209. 

of  innkeeper,  198. 

of  partners  to  third  parties,  234. 
Lien,  of  bailee,  193. 

of  common  carriers,  202. 

of  innkeeper,  200. 
Life  estate,  293. 

tenant  must  not  commit  waste,  294. 
Life  insurance,  274. 

concealment,  277. 

endowment,  275. 

form  of  policy,  278. 

insurable  interest,  275. 

misrepresentation,  277. 

notice  of  death,  280. 

payments,  279. 

premium,  277. 

suicide,  279. 
Lightning,  loss  by,  270. 
Limitation  of  action  (table),  351. 

statute  of,  75, 
Limited  liability  of,  stockholders  of  cor- 
poration, 251. 

partner,  227. 
Litigation,  settlement  to  avoid,  33. 
Loss  by  fire,  270. 

Lost  goods,  vender  has  no  title,  93. 
Lunatic,  stt  Insane  Person,  21. 


M 

Machinery  as  fixtures,  90. 
Maker  of  promissory  note,  124. 
Management  of  corporations,  260. 
Mandate,  183. 
Marine  insurance,  280. 

abandonment,  283. 

deviation,  281. 

fraud,  280. 

insurable  interest,  280. 

legality  of  voyage,  282. 

losses,  282. 

misrepresentation,  281, 

seaworthiness,  281. 

warranty,  281. 
Marriage,    agreement    in    consideration 

of.  55- 

effect  on  contract  of  agency,  1 77. 

estates  by,  296. 
Married  women,  23. 

table,  357. 
Memorandum  required  under  the  statute 

of  frauds,  54. 
Merger,  65. 
Misdemeanor,  339. 
Misrepresentation,  38. 

in  life  insurance,  277. 

marine  insurance,  281. 
Mistake,  35. 
Moral  law,  7. 

obligation,  33. 
Mortgage,  312. 

aby  interest  in  realty  may  be  mort- 
gaged, 313. 

assignment  of,  316, 

assignment  of,  form,  319. 

chattel,  loi. 

clause  fire  insurance  policy,  273. 

covenants  in,  316. 

defeasance  clause,  313. 

description  of,  313. 

discharge  of,  320. 

discharge  of,  form,  320. 

equity  of  redemption,  312. 

foreclosure,  318. 

form,  314. 

recording,  318. 

second  or  subsequent,  321. 
Mortuary  tables,  277. 


INDEX 


395 


Municipal  or  City  Court,  338. 
Municipal  law,  8. 
Mutual  benefit  bailment,  190. 
Mutuum,  187. 

N 
Name,  of  corporation,  250. 

of  partnership,  235. 
Necessaries,  infant,  20. 

lunatic,  22. 
Necessity,  agency  created  by,  164. 
Negotiable  instruments,  116. 

accommodation  paper,  147. 

alteration  or  forgery,  151. 

defenses,  149. 

discharge  of,  153. 

essential  conditions,  118. 

indorsement,  136. 

irregular  indorser,  146. 

maker  must  have  capacity  to  contract, 
152. 

may  be  signed  by  one  partner,  233. 

must  be  payable  absolutely,  121. 

must  be  negotiable  in  form,  119. 

must  be  payable  in  money,  and  amount 
must  be  certain,  119. 

must  be  signed,  118. 

must  be  in  writing,  118. 

must  have  designated  payee,  120. 

negotiation,  136. 

notice  of  dishonor,  143. 
.payment,  153. 

place  of  payment,  139. 

presentment  and  demand,  138. 

principal  characteristics,  117. 

protest,  144. 

questions,  156. 

right  of  holder  or  payee,  147. 

statute  law,  117. 

waiver  of  notice,  144. 
Negotiation   of  negotiable   instruments, 

136. 
New  trial,  347. 
Nominal  partner,  226. 
Non-disclosure,  effect  on  contracts,  40. 
Non-stock  corporations,  249. 
Notice,  to  agent,  171. 

of  death,  life  insurance,  280. 

of  dishonor,  143. 

efiect  on  liability  of  partner,  234. 


Notice,  to  indorsers,  144. 
of  loss,  fire  insurance,  274. 
of  meeting  of  stockholders,  260. 
to  one  partner,  notice  to  all,  236. 
of  protest,  form,  146. 
by  retiring  partner,  239. 


Obligation  of  agent  to  principal,  166. 

of  agent  to  third  party,  173. 

of  drawer,  137. 

of  indorser,  137. 

of  principal  to  agent,  165. 

of  principal  to  third  party,  170. 

of  third  party  to  principal,  173. 
Offer  and  acceptance,  24. 

must  pertain  to  same  object,  25. 
Offer,  must  be  communicated,  25. 

may  lapse,  28. 

may  be  withdrawn,  28. 
Operation  of  law,  discharge  of  contract 

by,  65. 
Oral  contracts,  15. 
Ordinary  bailment,  181. 
Ore,  real  or  personal  property,  56. 
Ostensible  partners,  225. 


Parties,  in  an  action,  342. 

to  a  contract,  15. 
Partner,  225. 

compensation  of,  232. 

dormant,  226. 

good  faith  between,  231. 

individual  liability  of,  231. 

liability  for  fraud,  236. 

liability  of,  to  third  parties,  234, 

limit  of  authority,  234. 

may  sell,  229. 

may  sign  negotiable  paper,  233. 

nominal,  226. 

notice  to  one,  notice  to  all,  236. 

power  of  majority,  233. 

public  or  ostensible,  225. 

rights  between 'themselves,  229. 

right  of  purchaser  or  inheritor,  229, 

secret  or  unknown,  225. 

silent,  226. 

special  or  limited,  227. 


396 


INDEX 


Partnership,  221. 

agreement  executed,  221. 

capital,  230. 

dissolution  of,  237. 

form  of  written  agreement  of,  222. 

good  will,  230. 

implied,  225. 

name,  235. 

notice  of  retiring  partner,  239. 

oral  contract,  224. 

questions,  243. 

reality  of,  227. 

record  of  transactions  of,  232. 

remedies  against,  236. 

trade-marks  and  trade  names,  231. 

written  contract,  222. 
Passengers,  carriers  of,  213. 
Pawn,  194. 
Pawnbrokers,  195. 

Payee,  of  negotiable  instruments,  rights 
of,  147. 

of  promissory  notes,  124. 
Payment,  before  maturity,  of  negotiable 
instruments,  153. 

in  life  insurance,  279. 

of  negotiable  instrument,  153. 

of  negotiable  instrument  by  indorser, 

154. 

by  note  or  check,  61. 

place  of,  139. 

in  a  sale,  108. 
Personal  property,  86. 
Plaintiff,  342. 
Plate-glass  insurance,  286. 
Plea,  344. 
Pleading  and  practice,  342. 

questions,  349. 
Pleadings,  343. 
Pledge  or  pawn,  194. 
Pledgee  may  sell,  94. 
Police  or  Magistrate's  Court,  338. 
Policy  of  fire  insurance,  270. 

additional  insurance,  271. 

alienation  clause,  272. 

amount  recoverable,  271. 

assignment,  272. 

cancellation,  273. 

factory  insurance,  273. 

location  of  property,  270. 

mortgage  clause,  273. 


Policy  of  fire  insurance,  notice  of  loss, 
274. 

of  life  insurance,  278. 

pro  rata  clause,  274. 

renewals,  273. 

vacancy,  272. 
Potential  existence  of  chattel,  95. 
Power  of  attorney,  161. 

form,  162. 
Powers  and  liabilities  of  corporations,  252. 
Practice  and  pleading,  342, 
Preferred  stock,  258. 
Premium,  in  fire  insurance,  265. 

in  life  insurance,  277. 
Presentment,  of  check,  134. 

of  bill  of  exchange,  131. 
Presentment  and  demand,  of  negotiable 
instruments,  138. 

when  made,  139. 

by  whom  made,  142. 

upon  whom  made,  142. 

for  payment,  whefl  made,  140. 
Principal  and  agent,  relation  of,  160. 

termination  of  relation,  174. 
Principal,     bankruptcy    of,     terminates 
agency,  177. 

death  of,  terminates  agency,  176. 

insanity  of,  terminates  agency,  176. 

and  interest,  154. 

liability  for  wrongs  of  agent,  171. 

may  terminate  agency  unless  coupled 
with  an  interest,  175. 

must  indemnify  agent,  165. 

must  reimburse  agent,  165. 

obligation  to  agent,  165. 

obligation  of  third  party  to,  173. 
Principal  defined,  159. 
Private,  carrier,  201. 

corporation,  248. 

stock  corporations,  249. 
Probate  Court,  339. 
Promissory  note,  123. 

discharge  of,  127. 

form,  124. 

joint,  124. 

joint  and  several,  1 24. 

several,  124. 

signature,  125. 
Property,  real  and  personal,  86. 
Pro  rata  clause,  fire  insurance  policy,  274. 


INDEX 


39; 


Protest,  form  of  certificates,  145. 

of  negotiable  instruments,  144. 

form  of  notice,  146. 
Public,  corporation,  248. 

enemy,  loss  by,  207. 

loss  arising  from  public  authority,  209. 

partners,  225. 

policy,  contracts  against,  46. 
Purchaser,  92. 


Questions,  of  law  or  fact,  345. 

agency,  177. 

bailment,  216. 

contracts,  76. 

corporations,  262. 

courts,  341. 

insurance,  286. 

negotiable  instruments,  1 56. 

partnership,  243. 

pleading  and  practice,  349, 

real  property,  328. 

sale,  112. 
Quiet  enjoyment,  covenant  of,  309. 
Quitclaim  deed,  310. 

form,  311. 


Ratification,  agency  created  by,  163. 
Real  estate,  also  real  property,  290. 
Real  property,  86,  290. 

'corporeal  and  incorporeal,  291. 

emblements,  295. 

estates  in  fee  simple,  292. 

estate  by  marriage,  296. 

estate  for  years,  321. 

land  contract,  299. 

leases,  321. 

life  estate,  293. 

power  of  corporation  to  hold,  250. 

questions,  328. 

sale  and  conveyance  of,  299. 

title,  299. 
Record,  of  deed,  307. 

of  mortgage,  318. 
Redelivery,  bailment,  193. 
Referee,  341. 
Reference,  341, 

Remedies  against  partnership,  236. 
Renewal  of  fire  insurance  policy,  273. 


Replevin,  348. 

Reply,  344. 

Representations,  in  contracts,  73. 

in  insurance  policy,  268. 
Restaurant  keepers,  197. 
Restraint  of  trade,  48. 
Reward,  25. 
Right  of  action,  69. 


Sabbath  day,  46. 
Sale,  conditional,  99. 

conditions  in  contract  of,  104. 

contract  of,  95. 

contract  in  writing,  99. 

and  conveyance  of  real  estate,  299. 

delivery  and  payment,  108. 

of  goods  act,  58. 

three  conditions  necessary  under  act, 

59- 

installment,  99. 

parties,  92. 

of  personal  property,  84. 

questions,  1 1 2. 

remedies  for  breach,  108. 

rights  of  vendee,  1 1 1. 

rights  of  vendor,  108. 

on  trial,  loi.       • 

under  execution,  347. 

warranties  in  contract  of,  104. 

when  title  passes,  95,  96. 
Sample,  sale  by,  107. 
Seal,  14. 

authority  of  agent  to  execute  instnt- 
ment  under,  1 61. 

of  corporation,  250. 

on  deed,  305. 

imports  consideration,  14,  29. 
Seaworthiness,  marine  insurance,  281. 
Second  mortgage,  321. 
Secret  partners,  225. 
Seizin,  covenants  of,  308. 
Seller,  92. 

must  have  good  title,  93. 
Several  promissory  notes,  124. 
Severalty,  estates  in,  299. 
Sight  draft,  130. 

form,  130. 
Signatures  on  promissory  notes,  125. 
Silent  partner,  226. 


398 


INDEX 


Simple  contract,  13,  15. 

form  required,  15. 
Sleeping  cars  not  inns,  198. 
Special,  agent,  160. 

partner,  227. 

property,  85. 

term,  340. 
Specific  performance,  73. 

in  contract  of  sale,  II2. 
State  courts,  338. 
Statute  law,  10. 
Statute  of  frauds,  53. 

agreement  not  to  be  performed  within 
one  year,  57. 

agreements  in  consideration   of  mar- 
riage, 55. 

contracts  for  the  sale  of  land,  55. 

promise  to   answer   for   debts  of  an- 
other, 54. 

promise  of  executor  or  administrator, 

54. 

sale  of  goods  act,  58. 

table,  357. 

when  writing  sufficient,  54. 
Statute  of  limitations,  75. 

new  promise  under,  76. 

when  time  begins  to  run,  75, 
Steam  boiler  insurance,  286. 
Steamship  not  an  inn,  198. 
Stock,  certificate,  249. 

common,  258. 

corporation,  249. 

of  corporation,  transfer  of,  259. 

preferred,  258. 

subscription  in  a  corporation,  257. 
Stockholders,  of  corporations,  257. 

liability  of,  261. 

limited  liability,  251. 

notice  of  meeting,  260. 

vote  of,  260. 
Stolen  goods,  vendor  has  no  title,  93. 
Stoppage  in  transitu,  109. 
Subagents,  168. 
Subject-matter  of  contract,  44. 
Subletting  lease,  326. 
Subpoena,  345. 

Suicide  in  life  insurance,  279. 
Summary  proceedings,  327. 
Summons,  342. 

form,  343. 


Supplementary  proceedings,  348. 
Supreme  Court,  339,  340. 

of  United  States,  337. 
Surrogate's  Court,  339. 


Tenant  and  landlord,  321. 
Tenant,  for  hfe,  294. 

in  common,  299. 

right  to  remove  fixtures,  91. 
Tender,  63. 
Term  of  lease,  322. 
Termination,  of  agency,  174, 

of  agency  by  act  of  the  parties,  175. 

of  agency,  distinction  between  power 
and  right,  175. 

of  agency  by  limitation,  1 74. 

of  bailment  for  bailor's  benefit,  187. 
Testimonium  clause  in  deed,  306. 
Thief  of  goods  acquires  no  title,  93. 
Time,  draft,  130. 

of  presentment  for  payment,  140. 
Title,  abstract  of,  300. 

insurance,  285. 

to  real  property,  299. 

when  passes  in  sale,  95,  96. 
Tortious  bailee,  183. 
Torts  of  agent,  principal  liable  for,  171. 
Trade  fixtures,  91. 
Trade-mark  of  partnership,  231. 
Trade  name  of  partnership,  231. 
Transfer  of  right  of  property,  84. 
Trees,  real  or  personal  property,  56. 
Trial,  345. 

term,  340. 
Trustee  in  bankruptcy,  68. 

U 

Uberrima  fides,  40. 

Ultra  vires  acts,  254. 

Undue  influence,  43. 

United  States  Constitution,  10. 

Unknown  partners,  225. 

Unwritten  law,  10. 

Usury,  154. 


Valuable  consideration,  33. 
Vendee,  92. 
rights  of.  III. 


INDEX 


399 


Vendor,  92. 

rights  of,  108. 
Verdict,  346. 
Virtual  acceptance  of  bill  of  exchange, 

133- 
Voidable  contracts,  17. 
Voluntary  bankruptcy,  66. 
Vote  of  stockholders  in  corporation,  260. 

W 

Wagers,  46. 
Waiver  of  contract,  60. 
Waiver  of  notice,  144. 
War,  effect  on  contracts  of  agency,  177. 
Warranties,  express,  104. 
implied,  105. 


Warranties,  in  deed,  308. 

in  insurance  policy,  269. 

in  marine  insurance,  281. 

in  sale,  104. 

of  title,  covenant  of,  310. 
Warranty  deed,  form,  303. 
Waste,  of  life  tenant,  294. 
Water,  to  whom  belongs,  290. 
Witnesses,  345. 
Work,  labor  and  services,  58. 
Writing,  when  appointment  of  agent  must 

be  in,  161. 
Written,  contracts,  15. 

instrument,    discharge    by   alteration, 
65. 

law^,  10. 


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